There's endless speculation about how Twitter will make money - and when. Twitter is really hot right now, making it attractive to advertisers for both outbound marketing and deep insights. However, I don't think Twitter will be able to build a long term, sustainable business through advertising revenues.
The brief history of online communities (all 15 years worth) informs us that it's virtually impossible to make money around them. No one has been able to build a sustainable business doing so that has lasted more than five years. The reason is, people online are fickle. We come and go. This is why I wrote that Twitter is peaking - at least as far as in its ability to grow users.
What Twitter has done, however, that very few companies have achieved, is build an amazing platform that developers love. That ecosystem, if they invest in it, changes the game.
Suddenly, Twitter is no longer a web site. Rather, it is becoming the web's first major social operating system. Twitter is to rapid fire online communication what Microsoft is to PCs, Apple and Blackberry are to mobile phones, Google is to search and advertising and Facebook hopes to become to the social graph. The numbers from comScore don't tell the real story. This BusinessWeek photo essay, which shows the innovation in the platform, does.
If Twitter invests in growing its platform and empowers developers to do more with its API (i.e. build profitable companies), it can create a remarkable business much as these other giants have before them. The beauty of it is they will never have to worry about the ever cyclical online advertising market or the fickle consumer who is in search of the next hot site. What's more it can spur all kinds of innovation, as the platform has already done.
This is the surest path for Twitter: mold the robust platform into a social OS and add premium services for developers and Twitter could become a giant business that weathers the ever-changing fickle nature of online communities. Choose instead to focus on growing site traffic and advertisers and it will fall prey to the same fate as The Well, GeoCities, Tripod, ICQ, Friendster and every community that walked before it.
So Twitter, be Microsoft, not AOL. Focus on the developers. Enable them to monetize and to grow with you. Become the Internet's first social OS and the rest will take care of itself. Do not chase Madison Avenue. Build the platform, monetize it with value-added services and inspire innovation and Madison Avenue and the rest of the world will plug into you.
