Sunday, March 15, 2009

How to Generate Revenue: Twitter

Twitter's revenue will come from location based advertisements send directly to users who opt-in to receive messages from regarding local or near-by events

Geo-tagging has become a prominent feature in many common devices and is on its way to becoming an ubiquitous feature on all electronic devices. Most all smart phones have the capability, digital cameras now include the option and in the near future will be a common feature on laptops.

Twitter's CEO, Evan Williams, recently hinted at integration of location based twitter messages during an interview. Currently the only way for Twitter users to identify their location is by including the GPS location via a shorten url link. This feature is limited at best, others can only view the original user's location by clicking through to the location on a map.

Williams suggested that Twitter could let people know what's happening in their immediate vicinity. He gave an example that users could be alerted to the fact a fire is burning a few streets away from their current location.

While alerting a user of local news may be a feature integrated into Twitter, it will be the stepping stone to larger revenue generating opportunities.

Location based alerts or tweets would allow for integrated location and time based advertisements. Mobile ads have been slower to take off in the United States compared to other countries, however, with Twitter users voluntarily signing up to receive updates from their favorite companies, the combination will allow spur the acceptance of mobile text messaging advertisements.

It would be possible for companies to send messages to twitter users based on their location and proximity to a local franchise.

In order for Twitter to make money with this location based revenue model, they need to do a couple of important things. First they need to control the GPS integration of their service. Currently they have an Open API model where anyone can develop software based off of the Twitter public timeline. Twitter needs to deem the Geotagging as a Premium product that is not part of the basic Open API. This is a crucial component. By controling the GPS location of users, Twitter will control the advertising possibilities and force advertisers to come to Twitter rather than the Twitter Clients or Apps or other third parties.

Secondly, Twitter needs to create an interface that allows users to opt-in to the location based messages and manages the relationship. Tens of thousands of users are already following their favorite companies, such as Starbucks and Whole Foods, and receive messages from those companies on a daily basis. This integration would allow for automated twitter messages to be sent by these companies to their followers based on the user's proximity to a local store (via a push & pull scenario). E.g., Starbucks could send free coffee or coupon to users near a local franchise or as they enter the facility (Push). Requests for coupons could be sent to "Gas Stations" for a user looking for the cheapest gas near their location (Pull).

Quick math shows the opportunity here: at a $10 CPM rate and 1Mil opt-in users (Whole Foods alone already has 237,000 followers) and an average of 1 message sent per day would generate $3,650,000 in immediate revenue.
(1,000,000 x 1msg/day x 356days= 365,000,000 ... x $10CPM ad rate = $3,650,000)

Implementation is key, Twitter needs to keep the simple interface in order encourage their current growth to continue.

No comments: