Twitter Shows Its Real Value

Google’s CEO Eric Schmidt refers to Twitter as a “poor man’s email.” For millions of individuals, small business owners, and even emergency services organizations, Twitter is rapidly becoming an integral part of their business strategies and personal lives.

That fact is not lost on the private equity and investment communities. Twitter confirmed a large investment on Friday, estimated at $100 million dollars, with a posting on their website:

“Yesterday we closed a significant round of funding with a group of investment firms that we’re excited to publicly thank: Insight Venture Partners, T. Rowe Price, Institutional Venture Partners, Spark Capital, Benchmark Capital, and Morgan Stanley”

Social media is touching all of our lives. Even in the early stages of social media development, it is hard to talk with any network or tech-savvy person without having a conversation that is fairly intelligent on the topic. Some think social media communities and applications are a complete waste of time, some are finding creative ways to make tremendous amounts of money, and others are simply indulging in bringing together long lost relations and newly found relations in an instant contact “matrixed” tool.

All About Bits Twitter, mentioned frequently in a media storm following the latest investment round, is thought to have a valuation of around $1 billion.

While it is difficult to place a hard monetary value on social networking, many investors are starting to jump on the social media venture bandwagon. Microsoft invested $240 million in Facebook, Digital Sky (a Russian company) another $200 million, all in a company that has only recently starting showing signs of generating income. Valuations change depending on who you talk with, largely based on their opinion of social networking. However one fact remains, social media sites are starting to attract serious interest and money from the investment community.

Why? Because even though social media sites and technologies are in the early “stone age” of development, we do understand how this method of bringing people, industries, and events together in a tech-driven community that allows instant global notifications of everything ranging from who is feeding their cat to instant emergency notifications of wild fire evacuations in California.

Twitter has “Become a Verb”

In 1999 we worked hard to startup a new data center business and communications operation for Level 3 Communications in London. It was fairly early in the days of SMS, but gateways allowed transmission of email messages into the SMS system, allowing us to send instant notifications from network management and monitoring systems to both email and mobile telephones.

In addition, as part of our business continuity planning, there was a very clear requirement for notifying individuals, including management, of events that may require a response, notification, or could potentially result in public interest in some level of our business.

The Level 3 software developers in London wrote a very clever, sophisticated web-based notification system that allowed us to meet all our notification and event-logging objectives. Basically a one-to-many broadcast network transcending mobile phone networks, email, pagers, and automated or human information sources. The only real limitation was the length of message, which could either be truncated or rejected based on the individual mobile network’s capacity.

Twitter takes that to a whole new level.

Twitter encompasses all the basic “food groups” of human communications. It supports one-to-one, one-to-many, and many-to-many models of communications. Twitter also supports both interactive and non-interactive (or real time) communications. Your “tweets” are transparent to the media used for either sending or receiving communications. A tweet doesn’t care if you are currently preferring a web browser, a mobile phone, or an email account – it will find you wherever you want it.

Twitter is Understood, Sort Of, and Has Our Attention

Let’s face it, aside from the fact Twitter works, and meets technical specifications and promises, possibly the most compelling reason we’ve adopted Twitter is the cost. It is free. I can send a thousand tweets, and the cost to me is the same flat rate – free.

What does it cost me to use Gmail, Yahoo Mail, or MSN Mail? Nothing, it is free. The only cost to me is the amount charged for accessing the Internet or mobile telephone network. How do they make money? Advertising. Same as the soon-to-be-former print media industry, such as newspapers.

Twitter is taking the cost and flexibility to another step. They have published some of their application programming interface (API) details, allowing private or independent application developers to “plug in” to Twitter’s platform.

An important point – Twitter is, at its lowest common denominator, a communications engine. That engine can be expanded on with much more powerful application support, taking advantage of the powerful interactive and non-interactive design.

Can Twitter Make Money?

Twitter, unlike other social media upstarts like LinkedIN and Facebook, has yet to make any money. Investors, no doubt, are also struggling with that question, and will also, no doubt, force the issue. Is it through introduction of premium services licensed via their APIs? Will our 140 character “tweets” now be truncated further to allow introduction of a MiniURL from an advertiser into each tweet?

Biz Stone, Twitter co-founder, told Reuters recently that “Twitter would not take advertising this year.”

Maybe Twitter is a special case, and will get a free pass on the need for revenue and avenue to “exit” for investors. Not likely. More likely, the development of “plug in” applications that will not corrupt the basic communications engine, such as the addition of geolocation features for both business and emergency services hold a key.

Licensing the communications engine to those who will “plug in” to the platform could be the higher value we are looking for in Twitter. Much like the basic infrastructure of fiber optics, wireless, utilities, and our freeway system, Twitter’s value could be in licensing fees for the additional value layered on top of the basic engine.

Or, other smart people may have already found an answer. Such as those willing to add another $100 million into the investment pouch.

Our User Role

As users we will eventually tire of sending meaningless, worthless noise tweets. The more users become aware of Twitter’s powerful communications engine, even higher value applications will emerge, taking advantage of Twitter’s communications innovation.

Whether it is ultimately Twitter, or some next-generation of Twitter, the concept is valid, and will become a part of the “matrixed” future. This is a good time to take Twitter out for a test drive, gain some tacit knowledge and experience in both social networking and Twitter’s communication engine, and plan for what role this will play in your personal and professional future.

John Savageau, Long Beach

About johnsavageau
Another telecom junkie who has been bouncing around the international communications community for most of the past 35 years.

4 Responses to Twitter Shows Its Real Value

  1. Kindra Lindbloom says:

    A marketing consultant recently recommended that I use Twitter to build a following before launching a Web site. I’m experimenting with that, and we’ll see what happens. I’m sure CocaCola or Nike can do it. But can a small one-person communications consulting company do it? So far, so good. I’m building followers and I’ve got Facebook group and fan pages for them to connect to for marketing message ideas…that’s where I blog at the moment. I’ll be happy if I find a few clients while indulging myself in my own writing voice. Here’s hoping I don’t get on down the road, only to realize I’ve wasted all of these hours. Anyone know the secret yet for making sure Twitter time pays off? Okay…I know the answer to that.

    • johnsavageau says:

      Kindra – good questions. I also think the business community is still trying to get their minds around twitter, or other micro-blogging technologies to determine their real value. One analogy I might play with as a baseline exercise is to look at the telephone. It can be used to start wars, establish companies, manage disasters, call home, or be a place supporting 13 year old boys and girls spending what we’d consider endless wasted hours.

      twitter is similar. We can use it to send emergency notifications of wildfires in California, broadcast the news when launching a new company, creating buzz in industry, or to let your followers know you are getting up to feed your cat. The big difference with twitter is the instant one-to-many and potential many-to-many communication characteristics. Very powerful if controlled, very noisey and annoying if not controlled.

      I think the key is learning to understand how to best use the tool, and then refine methods of employing the tool to meet our business and personal objectives. But we have a lot of noise to filter before that becomes a reality. Please let us know more about your successes, failures, or challenges using twitter in your plans!

  2. TJ says:

    Like kindra I too tend to start establishing a following with twitter before I launch a site but I’ve seen a tremendous success.

    First of all I’ve noticed due to some recent chances in the friendfeed/feedburner relationship that friendfeed friend count as subscriber on feedburner…a fact that has allowed me to pick up over 500 subs in less than 3 days for my chiclet.

    when you’re trying to get people to stick to your site sometimes perception and badges go a long way…and for me none of this would have been possible without the use of twitter.

    The biggest challenge I’ve found is when you try to use twitter as a sales platform…I doesn’t work in most cases. It’s great to help you become an influencer in social media and to recruit affiliates if you have your own digital products to sell, but I find that my efforts are much more effective if I just use it as a platform to help get other people awareness for the amazing things they are doing.

    when establishing relationships fast is a must , one cannot overlook the power of twitter.

    • johnsavageau says:

      Good point – particularly in a global economy and marketplace speed is everything. When your competition is no longer local, regional, or even national, you may find yourself competing for services business with a company in Brazil or South Africa.

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