Social networking site Twitter.com turned down a rumoured €380m all-stock offer from Facebook late last year. A recession was clearly coming, so why not cash out? Industry insiders believe Twitter — founded in March 2006 and yet to turn a cent — is waiting for better offers.

Better offers? For a company with no revenue? Cynics suggest a digital user-base is just zeros and ones, it’s not a licence to print money, pointing to more recent dotcom buy-outs, which have so far failed to live up to their financial promise, such as Google’s €1.65bn purchase of YouTube. Even Mark Zuckerberg, CEO of much-courted Facebook, said in October 2008: “I don’t think social networks can be monetised in the same way that search did.”


Some analysts say Twitter might be burning dollar bills right 
now but that it’s worth the flames to become the 
next Facebook. Twitter’s user base 
grew by 600% last year (and almost 1,000% in the UK alone), the success apparently resting on the immediacy of the interaction. 


Users sign up for free at Twitter.com and post updates via their computers or mobile phones. The bite-sized chunks are 140 characters or less and can include website links, best shortened by Tinyurl.com, zi.ma or other URL shrinkers. (That last sentence, including the full-stop, was 140-characters long.) Updates are listed chronologically on a user’s Twitter home page. The “tweets” of someone you follow appear in your viewing space.


While Facebook is an immersive website — with videos, pictures, adverts, games, distractions — Twitter is plain in comparison. Just text, really, but with the ability to send readers elsewhere via links. It’s like Instant Messaging, but to a group of people. “Twitter wires people into one-to-many relationships in a flexible, fast way,” says marketing blogger Chris Brogan.


Twitter, the company, is tiny. Founded by Jack Dorsey, Biz Stone, and Evan Williams of San Francisco podcasting company Odeo, as a side project, it became a product of their new company Obvious Corp, before branching out on its own as Twitter Inc. Angel-funded by investors including Jeff Bezos of Amazon, there are just 30 employees, it has almost no marketing budget and it has a front end that is as plain as Google.


Despite being free to users, Twitter costs millions of euros to run. The long-awaited revenue model has yet to appear. Shel Israel, author of the forthcoming book Twitterville, says: “Twitter has a clear monetisation plan. It is a business utility and it will charge fees for letting companies like Dell sell computers efficiently, and [US cable and internet company] Comcast clear the blemishes on its image from previous inferior service. It will be ad-free, and lucrative.” 


Co-founder Biz Stone says a commercial strategy is close: “Twitter will remain free for individuals but we are thinking about potentially charging for commercial usage. We’re noticing growth in the area of commercial accounts on Twitter, companies like [US airline] JetBlue, Comcast, Dell, and Whole Foods are using our services. We think we can add more value 
to these companies and we’re looking at the possibility of charging for commercial accounts. We don’t have a deadline for announcing monetisation plans.”


In January 2009, Twitter appointed Kevin Thau as director of Mobile Business Development, the company’s first employee whose job is to make money. The revenue models open to Twitter boil down to taking advertising or charging for use. The advertising option would be clumsy to operate, probably easy to filter out and off-putting to users, especially new ones, which makes charging for the service more likely. Ordinary users probably wouldn’t pay for Twitter, but power-users might. There are hundreds of such users, with 50,000+ followers, who, by plugging their products — such as e-books and seminars and talking gigs — make money. A ‘pro’ version of Twitter — costing, say €15–€25 a year and with moneymaking bells and whistles — would be attractive to existing and new power-users. There’s also likely to be a professional level for corporate accounts, too. Again, there would be added extras, enabling corporate users to measure their return on investment.


Twitter’s annual spend is estimated to be up to €60m, most of it spent on pumping out millions of free text messages to US members. A customer database of highly engaged users has perceived value. And that value is increasing. Use of Twitter is growing fast: currently there are six million users.


Most users follow only their friends, and breaking news sources (such as Janis Krums, the person who “broke” the plane landing in New York’s Hudson River and with it a new era of so-called ‘citizen journalism’) and Twitterers with similar interests. Blogger Chris Brogan with 34,000 followers, one of Twitter’s so-called rock stars, says: “Twitter isn’t amazing. The ability to connect to many voices in a collaborative way is amazing.” British TV personality Stephen Fry, US sports stars Lance Armstrong and Shaquille O’Neal, and CNN anchor Rick Sanchez are devotees and attract between 35,000 and 50,000 followers each. However, none of these can compete with the 144,000 followers of new US President Barack Obama. 


Twitter is evolving into a business tool as well. Business Twitterers include John Wolf, Marriott International’s corporate communications chief, who said in January: “Looks like a lot of our hotels and associates are joining Twitter.” And, as in the early days of the web, there’s been a name landgrab: @Starbucks was early to the table. 


More importantly, from a marketing perspective, there are growing tales of measurable return on investment. Dell is the first big example of a corporation turning Tweets into turnover, with a site-specific promotion that garnered more than €780m in Twitter-trackable sales for the technology corporation.


Contrary to US department store merchant John Wanamaker’s famous line, “half the money I spend on advertising is wasted; the trouble is, I don’t know which half,” sales from online advertising are transparent on the web. And Twitter’s text-based format makes this traceability even more obvious: there are no banners to click, or to avoid by switching off ads at the web browser level.


Savvy corporations, such as Starbucks, are already sending out Twitter-specific promotions. As a way of testing a market concept or pushing out an exclusive, time-sensitive offer, Twitter is quicker than RSS, broader than SMS, more immediate than websites or wikis.


Companies are starting to appoint Twitter wranglers. Scott Monty is head of social media at Ford. He Twitters in a personal capacity as ScottMonty but he has also created customer-related Twitter accounts, such as FordCustService. US firm Ingersoll Rand, a €13bn Bermuda-incorporated multinational which owns Club Car golf cars and Thermo King freezer trucks, appointed Donna Tocci as its first social media manager in autumn 2008.


Tocci says: “With the down economy and the need to keep eyeballs on their brand for less of a monetary figure, companies will turn more and more to using social media tools. They will need intelligent, personable people to be the face of the company to the digital audience; someone who will understand that it’s not about talking at people, it’s about creating relationships.” 


Boston-based Tocci is no stranger to fevered internet interaction between a brand and its customers. In 2004 she was PR manager at Ingersoll’s lock brand Kryptonite. When a forum poster revealed he could open a high-security Kryptonite bicycle lock with a ballpoint pen, the company was bombarded with forum and blogger complaints. Kryptonite executives decided not to engage. A few days after the firestorm started, Tocci was allowed to roll out a PR response. But the damage had been done and the brand had to be financially propped up by Ingersoll Rand. Tocci now sees Twitter as “essential”, and tweets away from work, too, as DonnaTocci. “Listening and learning aren’t 9am to 5pm activities,” she says.


Some brands have adopted Twitter wholesale. Tony Hsieh, CEO of US online footwear retailer Zappos.com, is fanatical about Twitter. Not only does he Twitter, he encourages his 1,600 employees to do the same. With sales of nearly €800m in 2008, Zappos uses Twitter to personalise the company: Hseih doesn’t actively ‘sell’ to his 38,000 followers, he posts mundane material as well as company information.


For critics, this mix of the mundane and the useful makes Twitter a distraction — a time sink. “Indulging these distractions looks just like work,” says Mike Elgan, a former editor of Windows magazine. “The new, increasingly compelling distractions get piled on to older ones. When does the work get done? When do entrepreneurs start and manage their businesses?” Despite these reservations, Elgan is a Twitterer, with just shy of 3,000 followers.


To solve its time-consuming side effects, legions of third-party applications are being developed to extend Twitter’s functionality, some of which are even making money.


Tweetdeck is a cross-platform Twitter application that helps people to organise the messages they receive from those they follow on Twitter. Following hundreds — or even thousands — of micro-messagers can be extremely time-consuming without such a filtering tool. The application is the work of British programmer Iain Dodsworth. After being downloaded over 250,000 times since the summer of 2008, he gained angel funding of €300,000 from US internet investment company Betaworks in January 2009.


Tweetie is one of many third-party clients to bring Twitter to the iPhone without having to go through a web interface. Tweetie costs €2.35 on iTunes and is the work of another back-bedroom developer, Loren Brichter of California. 


Twitter may not be making money, but Dodsworth and Brichter are. And, even better for these and others whose businesses are interlinked with the website, many believe Twitter is here to stay.


Ann Handley, editor of Marketingprofs.com, a US marketing resources and conferences company, agrees and believes Twitter could prove especially useful for marketing in a recession where advertising costs may need to be scaled down: “There’s always a risk that something brighter and shinier will eat your lunch, because technology changes so fast, but Twitter has size and momentum on its side.” 


Of course, should something even better come along, Twitter executives may rue the day they snubbed Facebook. But, co-founder Biz Stone says: “We’re big fans of Facebook and could see great potential in a partnership but the timing was not right. We feel we’re just getting started with Twitter.”