Twitter's Business Model

An interesting article recently published in 'Harvard Business Review' about Twitter's business model by David L. Smith who is the is the CEO of Mediasmith. I think everyone will like to go through it as anyone and everyone is talking about Twitter now.

It has become a popular game, even among investors who should know better, to dismiss Twitter based on lack of a business model. But there is a difference between not generating income and lack of a business model. I believe that, in just a few short months, Twitter will show the world that not only do they have a business model, but that theirs is the most sophisticated around. As the founders have admitted, they did not necessarily plan out their success. But the result of their outside funding and considerable valuation is that they have been free to watch and learn what might be possible.

Most publishers talk about the two common monetization streams — advertising and subscribers — as though there are no other options. As many have seen over the last year, dependence upon advertising is a slippery slope in a downturn.

Last week, Microsoft's Bing and Google announced "search deals" with Twitter, with Bing also making a deal with Facebook, allowing the search engines to show results related to "what is going on right now". They tried to build this and still may, but paying Twitter and Facebook is logical for now as they are rapidly becoming major referral engines to many sites.

In fact, these are traffic deals. Until now Google has been the only company on the planet to make major money by driving traffic to other sites. These deals are Twitter's first steps toward doing the same.