Twitter to charge for service

Fox News (foxnews.com) is running a story where they spoke to co-founders of Twitter who confirmed that they are working on some sort of fee based system for using the service.

Twitter, for those of you living under a rock, allows users to post small (140 character) messages called “tweets”, which any of the users’ followers can then see.

I have to admit, for the longest time I just didn’t “get it”. It seemed like a pointless service when we have email, instant messages, forums online and text messages via phone. I have since given it a chance and have discovered some valuable uses. It’s light weight enough where getting quick messages out there is extremely easy (for example, when a new post is made to your website).

Obviously, I’m not the only person that’s found a use for the service.  There seems to be no official number of subscribers anywhere I could find, but there are some websites that aren’t affiliated with Twitter that try to estimate the number of active subscribers. One site, tweetrush.com, estimates that there were over 1.7 million active twitter accounts on 5/26/2009.

Which brings us back to charging for service. I work in the technology field and I can only begin to imagine the technological issues that Twitter runs into. In fact, it’s no secret that Twitter occasionally runs into stability issues. I know for the @mindcryme account I regularly have issues with loading the web site. Luckily, I’ve found that using twhirl (a cross platform application based on Adobe’s AIR platform), these stability problems aren’t very noticeable.

Not only is the infrastructure expensive, but as the site becomes more popular the number of employees goes up. According to the story on foxnews.com, Twitter currently has 43 employees with plans to add more in the future.

Nothing in this world comes for free, so moving to a business model that brings in income is going to become essential in keeping the service up and running, at least until a larger corporation attempts to purchase the company.

The co-founders do not seem to have a clear plan as to how to turn a profit on Twitter. I can think of a couple of options:

  • Charge a monthly flat rate for service. I could see having a tiered approach to subscriptions, while still keeping the basic account free. My thought here would be that the tiers would limit the number of tweets or followers per month. For example, maybe the free service would allow 10 followers and 100 tweets per month, while a $5.99/month level would allow 100 followers and 1000 tweets per month. If only a quarter of those 1.7 million users paid, that would be a revenue of over 2.5 million every month! If only 10% of those users chose to subscribe, that would still be over $1 million per month.
  • Revenue from advertisements. I’m not very fond of banners as it clutters up the interface and the banner ads aren’t always always appropriate. It can be somewhat embarrassing to be browsing a tech website at work looking for information on a current project, only to have semi-adult banners all over the place. Referencing a report released by Adtech, emarketer.com reported that banner click through rates have been dropping for the last 5 years, falling to 0.19% in December of 2008. Clearly, just throwing banners in the web interface for Twitter isn’t going to generate as much revenue as a subscription system.
  • Get purchased by a larger company. I’m surprised we haven’t seen more attempts by large companies to purchase Twitter. A company like Google would likely be able to run the service for free, making up the revenue in other areas (such as AdSense). If Twitter is looking to be purchased, I would think they would want to do it in the short term.

So those are my thoughts on it. I would be willing to pay a small monthly fee, especially if it improved the stability of the web site. What’s your opinion? Feel free to comment below.

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