Tweetworks

As you might imagine I spend a fair amount of time thinking about Twitter and how it plans to monetize. It goes without saying that it actually matters to me and I really, really care about the topic.

When people hear that I’ve invested in the space I almost always get a response like “So, how are you going to make money? I mean Twitter doesn’t even have a plan to monetize.” This of course is pure comedy to me by the way. Seriously, how do “you” know they have no plan to monetize? Just because a private company in a new market segment hasn’t broadcast its business model to the world yet doesn’t mean there isn’t a plan to make money. Just think back a few short years ago to when everyone was saying Amazon.com will never make money.  So, the general answer is, I’m not worried about Twitter’s or Tweetworks’s ability to make money.

I think where people are getting hung up on a potential business model for Twitter is in their perspective. Most people writing about Twitter’s monetization mystery are looking through the lens of a retail user. They ask questions like “Would I pay for Twitter? Would you pay for Twitter?” over and over again.  Then of course there is the contextual ad model that we all expect to see at some point. This is the no-brainer and even if Twitter downplays its importance, there should be little doubt that we’ll see a Google Adsense-like contextual ad system. We should expect to see something like this if for no other reason than Twitter’s reliance on third-party applications makes a revenue sharing model necessary and desirable. Cutting developers in on the action has proved to be a windfall for Google and it would be hard for Twitter to pass that opportunity up.

But what if Twitter is thinking more like Microsoft and IMlogic?

Two Problems Facing Twitter and Its Would Be Enterprise Customers

1. Scale & Reliability: Jodee Rich of People Browsr, while on a panel about Twitter applications at 140Conf, mentioned that he “wants Twitter to scale” because he sees potential problems ahead. He pointed out the fact that while Twitter’s volume is still a tiny fraction of what we see in the SMS space where there are multiple telcos sharing the load, Twitter’s single pipe represents a significant risk. The “fail whale” is not scalable. As Verizon’s tagline says, “Your phone is only as good as the network its on.” This is true of your Tweets too. What would make Twitter more reliable and better able to scale?
2. Control & Flexibilty: We have also seen companies in regulated industries struggle with how to embrace social media, particularly in their use of Twitter, and still meet with their compliance requirements. Think about the financial services firm which is required to store all communications, internal and external, for years. Fidelity Investments isn’t using Gmail, although I’m sure they would love to stop spending millions of dollars a year on email. Fidelity is also not using AIM. Companies in regulated industries are not able to use Twitter no matter how much they would love to use it. What could Twitter do to satisfy these companies’ needs?

The Solution: Twitter’s Version of Exchange Server

Email and IM are effectively free to any retail consumer. Yes, you may have to put up with the contextual ads that Google serves up in your sidebar but people have never been expected to pay for email as a communications mechanism. The same holds true for instant messaging services. As mentioned above however, enterprise customers have concerns and needs beyond the those of the retail customer.

The need for guaranteed up-time, unlimited storage, permission settings for controlling access, and security requirements means that most businesses invest in products and services to manage communications in-house. This is why I think there is a tremendous revenue opportunity for Twitter to create its own version of an Exchange Server-like product. One look at the pricing for Microsoft’s Exchange Server should give you some sense of how attractive this market could be for Twitter.

Twitter’s main asset is not Twitter.com and its API but rather the convention of the user name, 140 character status updates, and all the parameters that go along with making it all run. Why does that need to be on Twitter’s servers to run? I personally would argue that it doesn’t and maybe even that it shouldn’t.

An exchange server offering from Twitter would also solve the problem of scale. Imagine the implication of moving from an API model where much of the Twitter ecosystem is dependent on Twitter’s up-time to a distributed application model. Twitter would be on hundreds, or even thousands of independently managed servers around the word. Each node would operate on the same platform but be customized to meet its own needs. Now imagine what the likes of Tweetdeck, Seesmic, and of course Tweetworks might do with such a system.

What do you think?

1. Is Twitter thinking like Google or Microsoft?
2. Might this explain why Twitter is slow to roll out obvious, highly desired and often requested features? Maybe they’re just not after the retail play.