Twitter has over 190 million users, processes approximately 50 million tweets per day, and is a new-media favourite.
Their business model is fairly simple: aside from licensing fees to search its contents, Twitter currently pulls from three revenue streams—promoted trends, promoted tweets, and promoted accounts—which should continue to grow alongside the network.
So, what’s the problem? Simply put, Twitter is not supporting small businesses as well as it could—or as well as it needs to in order to keep and attract users and marketers to Twitter.
Until Twitter partners with small and medium-sized businesses (SMBs), or creates new products to do so, the value of their platform will remain largely untapped. However, any shift requires dutiful consideration of all 190 million Twitter users, who value the ad-free, simple time-line space of their Twitter worlds and do not want them disrupted.
Can both needs be satisfied? Indeed, they can.
Some minor, if important, platform changes can allow Twitter to maintain its user freedom, simplify usability for its consumers, and help the company thrive. By shifting from offering only the current “user-centric” feed to offering at least one “attribute-centric” feed, Twitter can promote growth, offer users options, and increase revenue.
Simplicity can be deceiving
The current Twitter timeline is 100% “user-centric,” meaning that the only information ever thrown into a user feed is based on the user’s choices. The simplicity and ease-of-use of this model are extremely attractive. However, this unilateral approach, despite its pureness, may be impeding rather than unlocking the most value for the most users.
Google faced a similar problem as a 100% “content-centric” search engine, reluctant at first to embrace variations on the single, elegant search engine. Eventually, however, the realisation took hold that the regular search engine was more (not less!) powerful when combined with vertical search offerings like Google Scholar and Google Local. These verticals allowed for greater organisation, efficiency, and control, ultimately improving the user’s ability to access content.
While down-selecting to hyperlocal is a cool feature (Business Insider) it cannot, on its own, monetise Twitter’s potential relationships with SMBs. Specifically, a “location-centric feed” (one “attribute-feed” option) has the potential to create huge economic value for SMBs and Twitter (hereafter referred to as Twitter Local). For example, when a user walks to a new part of town, rather than trying to decide which restaurants to follow, instead the user can quickly identify willing patrons with discounts by a local function on the menu bar, which might look like this:
Of course, lists and other third-parties handle some of these issues, but Twitter can also leverage some of these filtering tools to its own benefit.
There are several ways that Twitter Local can benefit users and partners.
Let’s deal first with revenue, which itself is segmented into two parts:
1) Similar to Google Places, Twitter may be able to charge interested advertisers a monthly rate to be placed into the Twitter Local feed. Perhaps even a tiered offering based on distance from user would work, like a series of concentric circles with different price tags.
2) Twitter Local has the unique opportunity to mirror other successful online companies by providing vendors with an ROI metric. For example, Google utilizes click-through-rate (CTR) and cost-per-click (CPM) to provide vendors with highly targeted feedback on various advertising campaigns. In the same way, Twitter Local might employ a deal-through-rate (DTR) to provide meaningful metrics to SMBs (see “discount on jeans” in graphic above).
Assuming that Twitter employs a self-service platform, similar to AdWords, Twitter Local can greatly increase the marketplace for deals. Specifically, Twitter Local is filling the information gap that prevents many transactions from taking place. In fact, the overall market will increase (measured by volume of sales) because (i) fillng the information gap connects more buyers and sellers, and (ii) the information itself increases quantity demanded. Thus, Twitter Local will allow SMBs to better match supply with demand, providing much better price discrimination (see “cupcakes” example in graphic above).
In addition to the economic benefits to consumers and partners, there are a couple of reasons to believe that Twitter Local might be more popular than other local products: less searching and no checking in. As has been discussed elsewhere (The Web is Dead), people are growing increasingly less likely to enjoy surfing for information, and the push nature of Twitter Local puts potentially high quality information directly into feeds. It also eliminates the need to “checkin”, a function associated with some popular geolocation applications like Foursquare and Gowalla. Consumers (author included) are already suffering from “checkin-fatigue” and Twitter Local would be a welcome addition or supplement to the input-required alternatives.
A location-centric feed would share some common features and functionality with AdWords – the most successful partnerships with SMBs ever – that contributes billions of dollars to GDP (Google1). Assuming that Twitter Local can properly filter spam and have wide reach, it has great potential as a tremendous value creator.
The changes to the user would be slight as, after all, the location-centric feed would still be opt-in only, meaning users don’t even have to click on that menu option. But the results for usability and partnership with SMBs would be empowering, perhaps even establishing a mirror market to AdWords. Twitter’s adoption of this attribute-centric feed into their platform would benefit the service and its business potential, bolstering both users and revenue results.
(1) Estimate indicates that total economic impact of search and AdWords is $54B, given assumptions for multipliers on follow-on revenue opportunities for search and AdWords.