Twitter's New Business Model

 

Twitter has become one of the most effective outlets for breaking news. Twitter’s user base serve effectively as reporters of any type of important news around the world and use it as a platform to relay the news to their followers and to the broader user base. Twitter is widely credited for the positive role it played in garnering support for the Arab Spring, the Iranian Revolution in 2009 and other world-changing events. In fact, Twitter and other Social Media outlets have repeatedly beat traditional news outlets when it comes to breaking news. This can be evidenced by what happened after the Asiana Airlines crashed in San Francisco airport, when the pictures and the news was first reported on Twitter before traditional media outlets got to the venue and reported the news. This trend is likely to increase as Twitter’s user base that is in millions has a distinct competitive advantage over traditional media companies.

Although Twitter has over 280 million active users and is the fastest growing social network, it needs a sustainable revenue generation model to maintain its growth and move towards profitability and the new advertising model will help Twitter to do that. The success of this approach will be based on how well Twitter is able to execute this model without being too invasive of its users’ privacy. The new “promoted tweets” and key word targeting features of Twitter let advertisers target users based on device, gender, geography and interests. What is unique about Twitter’s advertising model is that advertisers pay Twitter based on re-tweets and the favorites that the tweet generates and not based on traditional advertising standards based on impression. This model is unique in the social network advertising space and is definitely more outcome-driven than other models leveraged by other platforms such as Google adwords and Facebook. While this is a very clever business model, it is too early to comment on its effectiveness as it relates to generating a steady stream of ad revenues for Twitter.