Scoble on Twitter's business model

John Shinal · June 3, 2008 · Short URL:

Latest from the Twitter front, where the company has admitted that it needs to re-architect its IT system from the ground up to prevent more service outages, and has brought in a new engineering team to take on the task.

Someday, everyone from VCs to entrepreneurs to computer science Ph.D.'s will study the problems at Twitter as an example of what happens when a company's service gets used in a way its founders didn't expect.

At an Under the Radar event on Microsoft's campus this week, we caught up with blogger Robert Scoble, who is Twitter's heaviest user and as such possibly the biggest human contributor to its frequent outages of late.

After the company said as much in a blog post, Scoble fired back, then met this past week with Twitter's founders to patch things up and find out what's next for the service. 

To push the conversation along, I asked Scoble about Om Malik's cogent argument that Twitter should charge its heaviest users if they're Twittering to support their commercial interests.

But Scoble disagreed, arguing that charging heavy users for messages isn't a model that will make Twitter a huge amount of money, because so few Twitterers are power users like himself, Malik or Michael Arrington.

"There's not enough of me (i.e., heavy users) to make a decent amount of money... it ain't gonna make you enough money to matter."

Twitter co-founder Evan Williams told Malik that they've considered charging commercial users, but the company's "not there yet." 

Scoble says Williams told him that money won't solve the outage problem, because hiring more coders or buying more servers isn't the answer. Only a total overhaul of its infrastructure will do that, because Twitter was designed as a content management system, not the messaging system it has become.

So how will Twitter make money?

"Who the hell cares what the business model is... they will have a business model if they keep their audience," Scoble exclaimed.

He made a comparison to Google, which was famously funded on a business model that it later scrapped on its way to dominating search. 

I was going to point out that the frequent outages were testing the patience of those users, but Scoble beat me to the obvious.

"If they (Twitter) lose their audience to FriendFeed or someone else... it won't matter, they're not going to have a business model," he said. 

Every investment wave has its poster child -- the one company that exemplifies the incorrect assumptions made by VCs and strategic investors when they bestow lofty valuations on companies with millions of users but no profits.

Those errors in judgment can only be known in hindsight, after the froth settles and once-promising companies are sold for less than 1x their investment.

It's too early to know for sure how Twitter will fare, but if they do get it wrong, if they do lose their audience, my guess is it will be Twitter's cuddly logo on that poster. 

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