How does Twitter not make money?
I confess I’ve not paid much attention to Twitter. As far as I’m concerned, the notion of mini-blogging dates back to the first day that Dave Winer started posting one-liners to Scripting News, which must have been well into the last century. Twitter’s only innovation has been to limit the post length to 140 characters and make it something you can do from a mobile phone or by instant messaging rather than merely from a browser. I’m sorry, but like fellow ZDNet bloggger Andrew Keen, I’m too long in the tooth to get excited about thumbing pithy remarks into the ether, let alone the prospect of having to read a constant stream of the same from friends and acquaintances.
My interest was piqued, however, by today’s TechCrunch report on Web services coming to Twitter. Apparently, a tweak to the Twitter API will make it possible to set up a Twitter account that allows an automated service to respond to queries such as “d weather 14202″ with an appropriate answer — in this example, the weather forecast for zipcode 14202. It’s pretty obvious that this has enormous potential, since similar services are already available via mobile phone networks, which any startup could now undercut by using the Twitter service, as TechCrunch’s writer explained:
“Currently, it costs a lot of money to launch a start-up in the SMS/mobile space — you have to license a shortcode monthly ($500-$1000/mo), pay a SMS gateway provider, and then pay anywhere from $0.03 – $0.05 per inbound or outbound text message. It adds up. But now, if a start-up chooses to use Twitter as a command line to their web service, it’s free (until Twitter starts charging for it).”
Twitter’s own 40404 SMS address is itself a shortcode, for which Twitter presumably pays up to a $1000 per month plus a few cents per message. The new API tweak allows Twitter to piggyback any number of separate direct response services within its own shortcode. That’s a potentially very valuable service offering.
But it also set me wondering about Twitter’s own business model, and how it has to be making a ton of money already (unless its founders really are clueless). Because none of those shortcode services are charitable concerns; they’re all money-making ventures. They’re premium-rate text destinations, for which users normally pay to receive a response. They make money because the service provider gets paid a cut of the charge your telco puts on your phone bill.
