The company was acquired by enterprise software investment firm Cuadrilla Capital last monthRead more...
CEO Jack Dorsey, who says Twitter captures the 'status of everything,' talks about monetization
(Note: Twitter CEO Jack Dorsey stepped down in October. Many have said that Twitter needs to find a business model, hence the need for Jack to make room. I just spoke with John Borthwick, who is an investor in Twitter, through Twitter's acquisition of Summize. John thought it would be worth re-publishing and sharing this interview since in it, Jack elaborates on possible business model strategies. I thought it would be worth republishing as well. This interview first ran on July 20. Enjoy)
In 2004, I wrote: “I’m searched, therefore I am. To borrow from Rene Descartes' philosophy, in today's Internet-obsessed world, we know we exist, not because we think, but because we're searched.” Today, thanks to Twitter, it's more like "I'm followed, therefore I am." Indeed, even Twitter CEO and co-founder Jack Dorsey says Twitter essentially captures the "status of everything." Wait, I thought Google was God? Anyway, Jack came to the Vator studio for a three-part interview to talk about Twitter’s business model, the Summize acquisition, the introduction of video updates, and how he views Seesmic, which calls itself a video Twitter, FriendFeed and Twitter clones, such as Pownce, Plurk and Identi.ca. And, that's all in this interview.
I started by asking why Twitter bought Summize for $15 million in mostly stock, rather than licensed the technology. "We’ve always seen filtering and real-time search as a key component to the product,” he said to me. "We see Twitter as a real-time repository of state, in addition to a communication tool."
Indeed, if you spend enough time Twittering, you'll probably begin to see how this "real-time repository of state" makes Google searches look really stale. Just do a quick "Twitter search" about a topic, and you'll see that the information that comes up changes with every update, which is quite often. That same topic will get the same top two dozen links on Google.
Twitter's ability to deliver the "real-time state" of everyone and everything - including a plant (inside Jack joke) - raises its value significantly, in my opinion. If Twitter were public, I would have raised its rating after the Summize deal.
So, what are Twitter's business models?
Obviously, there is a potential business model around paid search, one form of monetization that Jack and I discussed in this interview. In this interview, Jack talks about when this may be introduced. But we also talk about a number of models, including charging Whole Foods, JetBlue and others to use Twitter to capture market research about their customers. In the case of CNN and other news outlets using Twitter, it's very conceivable that Twitter will make money much like news wires make money - meaning licensing the data.
Jack also talks about how Twitter makes money today - through SMS - and that even though his team thought the mobile phone would be the predominant platform through which updates are made, it's not. Finally, Jack talks about whether Twitter will allow for video updates, much like Seesmic, and how he sees the competitive landscape.
(Note: Jack joins me for two other interviews. One is on how Twitter is changing the way we socialize (and stalk, err, I mean observe). The other interview is on lessons Jack has learned as an entrepreneur. Watch for those in the next week.)
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Read more from our "Interviews" series
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What is Twitter?
Twitter is an online information network that allows anyone with an account to post 140 character messages, called tweets. It is free to sign up. Users then follow other accounts which they are interested in, and view the tweets of everyone they follow in their "timeline." Most Twitter accounts are public, where one does not need to approve a request to follow, or need to follow back. This makes Twitter a powerful "one to many" broadcast platform where individuals, companies or organizations can reach millions of followers with a single message. Twitter is accessible from Twitter.com, our mobile website, SMS, our mobile apps for iPhone, Android, Blackberry, our iPad application, or 3rd party clients built by outside developers using our API. Twitter accounts can also be private, where the owner must approve follower requests.
Where did the idea for Twitter come from?
Twitter started as an internal project within the podcasting company Odeo. Jack Dorsey, and engineer, had long been interested in status updates. Jack developed the idea, along with Biz Stone, and the first prototype was built in two weeks in March 2006 and launched publicly in August of 2006. The service grew popular very quickly and it soon made sense for Twitter to move outside of Odea. In May 2007, Twitter Inc was founded.
How is Twitter built?
Our engineering team works with a web application framework called Ruby on Rails. We all work on Apple computers except for testing purposes.
We built Twitter using Ruby on Rails because it allows us to work quickly and easily--our team likes to deploy features and changes multiple times per day. Rails provides skeleton code frameworks so we don't have to re-invent the wheel every time we want to add something simple like a sign in form or a picture upload feature.
How do you make money from Twitter?
There are a few ways that Twitter makes money. We have licensing deals in place with Google, Yahoo!, and Microsoft's Bing to give them access to the "firehose" - a stream of tweets so that they can more easily incorporate those tweets into their search results.
In Summer 2010, we launched our Promoted Tweets product. Promoted Tweets are a special kind of tweet which appear at the top of search results within Twitter.com, if a company has bid on that keyword. Unlike search results in search engines, Promoted Tweets are normal tweets from a business, so they are as interactive as any other tweet - you can @reply, favorite or retweet a Promoted Tweet.
At the same time, we launched Promoted Trends, where companies can place a trend (clearly marked Promoted) within Twitter's Trending Topics. These are especially effective for upcoming launches, like a movie or album release.
Lastly, we started a Twitter account called @earlybird where we partner with other companies to provide users with a special, short-term deal. For example, we partnered with Virgin America for a special day of fares on Virginamerica.com that were only accessible through the link in the @earlybird tweet.
What's next for Twitter?
We continue to focus on building a product that provides value for users.
We're building Twitter, Inc into a successful, revenue-generating company that attracts world-class talent with an inspiring culture and attitude towards doing business.
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People share their opinion on any topic in video. There is a social software layer, much like Twitter, to follow the conversation. Loic calls it the "CNN of my friends."
There are 2,000 videos posted per day with only 1,500 people subscribed to the stealth site.