Twitter Economics

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Brian SolisDecember 22, 2009in Business Growth, Social Media

With a $1 billion valuation, Twitter is becoming, according to Co-Founder Evan Williams, an information network, a practically priceless exchange for connections, information, and the resulting activity that ensues.

Indeed, Twitter appears to have evolved into a human seismograph, a lifeline interweaving people through conversations, reciprocity, and connections inspired by the interests, ideas, passions, causes, and observations that move them.

Twitter’s core and most loyal users are at one with the service. Their daily actions hinge on the availability of Twitter (#whentwitterwasdown) and flourish with every new application introduced to improve the experience. Much more than a social network, the 140 character tweets that populate our attention dashboards lead us on unpredictable paths that connect us to new people and information – changing and evolving every time we log in.

A recent study by ChubbyBrain documented Twitter’s ability to foster a dedicated technology and business ecosystem. According to the report, angels and VCs had invested $23.27 million by June 2009 in Twitter-based startups. Two years ago, there was only one Twitter app. Today, there are over 50,000.

Call it Twitter economics.

Social capital and its ties to the attention and trust economies is earning undeniable prominence and stature in business and social ecosystems. It is earned and measured through our actions and words and reinforced through recognition, interaction, and reciprocity.

In real life and in business, we earn the relationships we deserve. And, the status of social capital is a reflection of our investment in its growth and definition.

The Market for Connections and Conversations

As social media defines the framework that establishes, cultivates, and leverages social capital, individual social networks are simultaneously building exchanges dedicated to defining the systems and values governing network economics. Twitter has created a thriving network economy rich with relationships, conversations, and the empowerment of its users to effectively and successfully build and cultivate communities and nicheworks around its brand and core values in and around Twitter. Simultaneously, Twitter created a dedicated ecosystem for applications and developers by opening up the platform for customization and opportunities.

Essentially, Twitter created an architecture that allows businesses to build experiences on top of it, ultimately creating a Social Operating System (OS) not unlike what Microsoft and Apple created for Windows and Mac.

While at LeWeb in Paris, Twitter’s Director of Platform Ryan Sarver announced that in three years, over 50,000 applications have been registered using Twitter’s API’s. It’s an incredible milestone as just a few years ago, the Twitterverse was populated by 1. It’s also indicative that the Twitter economy is burgeoning. While Twitter itself is finalizing its revenue strategy, developers are already turning profits while facilitating new systems for collaboration, communication, analysis, and entertainment.

Sarver also announced a new leadership program designed to further stimulate and strengthen the Twitter economy (as sourced from TechCrunch).

Twitter’s 2010 Focus:

Transparency: Increasing communication regarding public policy and intentions.

Communication: Actively communicating to include developers in the true state of affairs and technology.

Utility: Continue the expansion of rich and robust APIs to empower third-party developers to thrive.

Profitability: As quoted, “When our partners succeed, we succeed.” Read, “stay tuned in early 2010.

To commemorate its commitment to its developer community, Twitter also announced that it will launch a new online resource center, including status dashboards, tutorials, contacts, etc.

And, to celebrate its vibrant developer community and the applications defining the Twitterverse, Twitter will organize and host Chirp, its official developer conference in San Francisco next year.

Twitter Silences the Skeptics: Now Profitable

For years, pundits debated as to whether or not Twitter would ever turn a profit, mocking the company for its focus on community over revenue. Years of questioning were silenced yesterday as Twitter quietly turned a profit to close out 2009. With very little fanfare, the finances surrounding Twitter’s recent deals with Google and Microsoft trickled into the news stream, largely unnoticed by many.

In October, Twitter signed multiyear content agreements with Microsoft for Bing and Google to make real-time content streams indexable and searchable. It’s estimated that the Google relationship is worth $15 million and Microsoft $10 million – per year. After joining Twitter in September, Chief Operating Officer Dick Costolo served as a key role in securing the search engine deals. As the founder of Feedburner, Costolo had the right connections and the experience. He’s also experienced in monetizing feeds through creative advertising models.

As BusinessWeek reports, Twitter also reduced a bulk of its telecom expenses in order to balance the company’s finances to achieve profitability this year. Prior to earning worldwide stardom, Twitter paid sizable fortunes to telecommunications companies to support the distribution of billions of text messages. Insiders report that this was the company’s largest line item. Prior to the proliferation of third-part apps that enabled mobile tweeting, many users relied on text messaging the service to publish and read tweets. Now that Twitter has gained a position of leverage, every deal was recently renegotiated to drastically reduce costs.

As the page turns from 2009 to 2010, Twitter is readying its initial advertising model and also preparing the roll out of paid commercial accounts that offer premium business services. Even though the company is now profitable, Twitter remains acutely sensitive to the user experience. These new services and programs must not disrupt engagement.

At a conference recently, Costolo echoed this promise, “We want to do something that’s organic and in the flow of the way people already use Twitter.”

2009 was indeed the year of Twitter. For those social economists tracking the growth opportunities and the transactions defining the Twitter index, 2010 will be the year of not only Twitter, but the business of Twitter and its supporting ecosystem as well.

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