16
Jan
09

Best Friends For Life costs $1… but Twitter’s profit potential is still looking shaky

You’ve probably read by now the ReadWriteWeb article today suggesting that (in stark contrast to a post I made a month or so back) Twitter may very well soon have itself a revenue stream that isn’t comprised of simply raising more investor dollars…. they’re speculating that companies may soon be able to sign up to a ‘recommended’ friends/followers list presented to new tweeters, and will pay a cost of $1 per person who decides to follow them based on this list. This suggestion was supported in part by Mahalo founder and general social media posterboy  Jason Calacanis’s tweet earlier this week. I’m not sure RWW’s speculation is anywhere near true, or if they’re potentially reading too much into a flippant tweet by Calcanis… I’m no web revenue expert, but this idea definitely raised a few questions for me.

THE RATIONALE

At first glance, it seems a good idea – for marketers to pay $1 in order to reach a member of a captive audience just once is actually good value. There are campaigns I’ve seen (NOTE: campaigns I’ve seen, not ones I’ve run :D) where the cost per customer reached has entered triple figures, so if marketers can potentially reach a customer numerous times for a buck, hell yeh, count me in. That’s good value.

However, there are two problems / contradictions with this revenue model.

PROBLEM 1 – Twitter is primarily people and information

I generally don’t like following companies on Twitter. In fact, no-one likes following companies… if we look at (one measure of) the world’s top 100 most powerful Twitter users, the entire top 100 is made up of 2 types of Tweeters – ‘content providers’ (newsources, bloggers etc) and ‘online personalities’ (Chris Brogan, Guy Kawasaki etc etc). There is not a single company represented. This is because the beauty of Twitter is that it takes a massive quantity of ‘sort-of-relevant’ information and condenses it so I can pick and choose stuff to consume, making it ‘exceptionally-relevant’ – much more than being just a way to post status updates, Twitter is a great way of filtering information. Marketing messes with this – I’d suggest the companies who are most likely to buy friends on Twitter are not necessarily going to be providing compelling content in their Twitter feeds, and as such will be adding to the noise. As such, these companies won’t retain followers for extended periods. Targeted, compelling content is necessary to simply remain tolerated, let alone followed.

I don’t think Twitter will care too much about this problem though, as long as they get their $1 per follower. It is, however, something marketers should be aware of – there are no cheats or shortcuts when building customer relationships. Over time, more marketers will become hip to this fact. Which leads directly to the second problem – that there’s a work around to having to fork up the cheddar to Twitter for followers….

Cash rules everything around me

 

PROBLEM 2 – If you build it, they will come.

So, if you’re going to buy followers, you want them to stick around at least for a little bit. Problem 1 above states that buying friends on Twitter is simply not enough to ensure an ongoing following – to optimize your efforts, you’ll need to provide compelling content to make sure people keep following you and to make sure your $1 per potential customer reached is not spent in vain.

Let’s pretend you have a budget of $20,000 for a Twitter campaign (yeh, $20k is alot for twitter, but I did say ‘pretend’ didn’t I? 🙂 ). Anyway, you’ve just started a new Twitter account and you have 2 options – option 1 is that you can buy 20,000 followers for $1 a pop through Twitter’s suggested friend option (that is, if there’s 20,000 people out there who will follow you). But what are you going to say to these followers to hold their attention? You probably can’t just pump your followers full of your latest deals… problem 1 states that doing this means you’re likely to be un-followed.

Your other option is to start organically building a following from scratch, doing things like finding people who mention your product / competitor products through search.twitter.com, trade link love with others twitterers with similar interests etc). Having a dedicated person using part of their work week sourcing ongoing, targeted, compelling content for your followers will make this easier, and that’s what you’ll spend your cheddar on, not buying followers from Twitter. This option represents a longer road, but ultimately if your content is right, you could easily have your 20,000 followers before long, plus have a much richer relationship with them than if you had bought them, plus, you have not paid Twitter one red cent to do it. Companies who understand Twitter and the nature of social media will do things the second way, and will succeed… and moving forward, more & more companies will fall into this category.

CONCLUSION

If Twitter rolls something like this out, they’ll make some quick bucks out of it, but I’m not convinced it’s an optimal model long-term for either marketers or Twitter. I certainly don’t pretend to have an answer for Twitter’s revenue problems (although I still think that having Twitter users backgrounds as dynamic ads / sponsored backgrounds as a default setting when a new account is opened shows promise). If you have any thoughts on it, please leave a comment below. I guess we’re yet to see what Twitter can deliver in the way of a reliable, consistent income stream, particularly in a world where everyone wants everything for free. Best of luck, Twitter.

EDIT (16/01/09) – I forgot to add, this speculation from RWW was likely encouraged by a TechCrunch post earlier this week suggesting the appointment of Kevin Thau to Twitter may be as a revenue generation specialist.

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