3: Focusing on being a network not a destination
Twitter’s business model has evolved a lot, but I still believe there is a larger opportunity for the company hiding behind a paradigm shift that hasn’t happened yet, but could.
The ultimate 100 billion dollar question is “what is Twitter, really?” Is it a media company? Is it a portal destination? Is it an app? Is it an infrastructure? Or is it a network? How you answer this question makes all the difference in the world.
I think the best answer is that Twitter is a network. It’s a network for distributing and accessing the world’s real-time information. This is a much bigger idea than being just a destination or an app.
Twitter destinations and apps are simply endpoints that provide views into this network. The real value of Twitter is the network and the network effects it enables.
Ironically, during the first years of its ascent, Twitter behaved more like a network than a destination. And that mindset correlated directly to Twitter’s massive growth curve at the time.
It appears to me that when the company began to shift towards thinking about itself as a destination, not a network, that ecosystem growth, user growth, and engagement began to level off. Maybe there is something valuable in this observation?
Let the ecosystem innovate
Bill Joy famously said, “Innovation happens elsewhere,” and he was right. There is always more innovation potential outside an organization than within it. The key is to figure out how to catalyze it and profit from it.
Twitter is ideally positioned to do this — as long as it thinks of the business model as a network not a destination.
How to do it:
- Relaunch a new version of the public APIs.
- Let small and large developers compete on an even playing field to invent new uses, interfaces, and features that drive adoption and engagement for Twitter.
- Make Twitter extensible with apps that developers can create and run inside Twitter, like Facebook apps in Facebook.
However, while the reasons were legitimate, the side-effect was that a thriving ecosystem of legitimate third-party applications was turned off. That ecosystem happened to drive a lot of long-tail use-cases and traffic to Twitter, but more importantly, it was constantly innovating new user interfaces and features for Twitter. It was an incredible engine of innovation.
By finding a way to restart that ecosystem, Twitter could energize thousands of developers and millions of users to help it innovate. Let a thousand flowers bloom. These were the core founding principles of Twitter, in fact. As I have sometimes said, “Twitter’s future is really its past.”
Unlock Twitter’s monetization potential as a network
I have written elsewhere that I believe that thinking of Twitter as a network yields a bigger return for investors than thinking of Twitter as a destination. Destinations are old-paradigm concepts. Networks are the future. In fact, the network IS the destination.
Instead of trying to get all the eyeballs to come to a single portal-style destination site or app, Twitter can be a much larger and more entrenched global utility by being the network powering millions of different destinations and apps.
The key to this working is for Twitter to be open while still controlling the content standards, monetization, and advertising spots, across the network.
I have for many years been refining what I believe could be a better model for doing this. Twitter can be bigger, and make a lot more money, as a network, than as a destination.
How to do it:
1. Reduce barriers to spreading Twitter content
- Twitter content is like a virus that spreads Twitter monetization opportunities. So let the content spread more easily, as long as it carries Twitter monetization with it.
- Anyone should be able to reuse and redistribute Twitter content for free via the Twitter APIs (which would need to be modified and reopened to support this concept). The APIs would be similar to the previous public APIs; they would not provide the full firehose.
- Third-party apps (yes, even third-party Twitter client apps) would be permissible as long as they don’t change the original content (which should come pre-formatted as cards from Twitter, where the authors get to control their formatting).
- Augmenting the content provided by Twitter with additional metadata or context (such as related links, comments, etc.) would be permissible as long as the original card content is not obscured or altered.
- In addition, third-party apps should be required to display Tweets in the order provided by Twitter, unless they pay to buy out the ad space (see point 3 below).
2. Anyone who displays Twitter content in a consumer facing app MUST carry Twitter’s ads
- Any app that displays tweets must agree to carry Twitter’s ads in the content.
- They must only display Twitter ads (also provided as cards) from Twitter in or around that content. No other ads would be permissible in Twitter content. However, it would be permissible to run ads in their own pages or apps outside the Twitter content (not inline).
- Ads would be cards served by Twitter and would be displayed on a variable frequency within any list of tweets. The frequency would be determined by Twitter’s algorithms.
- Twitter ad cards would be served in a targeted fashion by Twitter. Apps that use Twitter content must allow Twitter to place and read targeting cookies on their users as well.
3. Apps that don’t want to run Twitter ads would have that option by buying out all the ad space from Twitter
- App providers that wish to carry Twitter data without Twitter’s ads, would have the ability to do so. But they would have to buy out 100% of Twitter’s ad slots in the stream of tweets they display. This would be done by calling a different content API from Twitter that would bill them for each ad that Twitter does not display.
- Companies that pay to buy out Twitter’s ad inventory on tweets could insert their own ads within or around the tweets they display.
- The beauty of this is that Twitter would be paid for every ad slot in this scenario. In fact, this could be potentially more profitable for Twitter because 100% of its ad inventory would be paid for in any app that chose to do this.
4. Twitter would still charge a CPM for full-firehose data
- Full firehose data has significant costs to Twitter to host and serve. It’s quite a different animal than rate limited or time limited API pulls, which should be free like they used to be).
- However the CPM to buy firehose data from Twitter could be dynamically priced and therefore lower than it is today, because Twitter’s total daily volume continues to grow, making the relative value of a tweet lower than it was before.
- You can think of this just like inflation in economic terms — the more tweets there are, the less valuable a single tweet becomes, so the cost to buy a tweet should be adjusted down accordingly. Effectively it would be a built-in volume discount for firehose customers.
- This will make it possible for brands and analytics companies to continue to afford to analyze all the data they need to analyze without the price constantly climbing as data volumes increase.
- Even with a dynamically priced CPM for firehose data, Twitter would still grow data licensing revenue because more firehose use would result from a lower cost per Tweet.
- Coupled with the other suggestions in this article, this could enable data licensing to become a much larger portion of Twitter’s revenue mix in the Twitter-as-network paradigm.
Become the world’s real-time marketplace
Perhaps the biggest untapped potential for Twitter to grow its revenues isn’t advertising but commerce. If Twitter adds richer semantics, as I’ve suggested above, it could become the world’s biggest real-time marketplace. Think of it as Craigslist + eBay + Alibaba combined, and all in real-time. This could ultimately be a bigger play than advertising for Twitter.
Think about it this way: Twitter is already a marketplace for attention — in particular, attention to content. But what if it could also be a marketplace for products and services?
How to do it:
- There would need to be a standardized taxonomy of cards with the appropriate metadata fields for describing various commercial offers and requests for different types of goods and services.
- There would also need to be a way for users to create requests to get cards that match their criteria. Users would need ways to create weighted parameterized searches such as “I want to find offers of used Tesla cars for sale, and price is more important than mileage.”
- There would need to be a marketplace portal for navigating categories of these types of commercial offer cards. For example, there would be categories for real estate, personals, services, cars for sale, consumer electronics, jobs, and every other commercial category of interest.
- Twitter would provide and standardize this categorization scheme, but an ecosystem of third-party apps and services could also provide interfaces and tools for participating in this marketplace.
- In addition, by enabling users to pay to make their Tweets more visible, marketplace participants could compete and spam could be weeded out economically. This is a win for everyone.
- Twitter could provide optional payment settlement, purchase protection, escrow, premium verified seller and buyer programs, and other transaction support, with appropriate fees charged to the seller and/or buyer — an additional massive revenue stream for Twitter.
- Most importantly, users would need to be able to choose what channel they were looking at — so if they only want to see content, not commercial offers and requests, they can do that. On the other hand, if they are looking for real-time deals or classified ads, they could do that efficiently without having to pore through irrelevant content.
The ideas above, if adopted, could go a long way to restoring Twitter’s former growth rates and could also help Twitter realize the massive untapped potential of the network it has built. I am hopeful that Twitter’s management team will adopt some of these suggestions in coming years. If this happens, then today’s Twitter stock price is an incredible bargain!
Nova Spivack is a technology futurist, serial entrepreneur, and angel investor, focused on next-generation of search, AI, big data, and the Web. He was recently ranked in the top 20 futurists based on an analysis of social and Web influence. He is cofounder and CEO at Bottlenose.