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Summary:

With its redesign, Twitter seems to be reluctantly embracing its status as a media company. Why the reluctance? Because as newspapers and other media businesses have clearly shown, online media is hard to monetize, and Twitter is already under pressure to turn on the cash-flow taps.

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Twitter rolled out a fairly radical overhaul of its website last night, including support for embedding of photo galleries, videos and other media content, and what appears to be plenty of room for advertising. As Peter Kafka at MediaMemo notes, the company seems to be reluctantly embracing its status as a media company.Why would it be reluctant to do this? The biggest reason is that — as Hunch founder and angel investor Chris Dixon said recently — media is hard to monetize, and Twitter is already under pressure to turn on the cash-flow taps.

As I’ve argued before, Twitter has effectively become a news platform, with journalists (both professional and amateur) using it to communicate and distribute all kinds of media content where real-time delivery is a necessity. In many ways, the service has evolved and changed in order to meet the needs of its users, as Venrock partner David Pakman argues in a blog post. Even before the relaunch, there were signs the company was coming to terms with its new status as a media entity: Twitter VP of Business Development Kevin Thau told the recent Nokia World conference that the company isn’t a social network at all, but an information network.

So Twitter is a phenomenally popular new medium, with close to 100 million messages posted a day and more than 145 million users — what’s so bad about that? The biggest issue is that media companies typically rely on advertising for their revenue, and the online advertising business (not to put too fine a point on it) sucks. More and more companies and websites are chasing the same advertising pie, and as a result, the slices are getting thinner and thinner. Both Yahoo and AOL seem to be betting their future on being content-aggregation companies, and in a business where scale matters, they could wind up taking the lion’s share and leaving Twitter with very little.

Twitter is doing its best to monetize all the media flowing through its servers — via its new Promoted Tweets and Promoted Trends features — but even there, it has to walk a fine line between appealing to advertisers and serving the users who see it as a communications medium, and might not take kindly to seeing their real-time news network cluttered with ads. So what is Twitter to do? Entrepreneur Nova Spivack says the company should consider charging users per tweet, something he says would make a bundle. Then Twitter becomes the phone company, and has a whole new set of problems.

In the end, all Twitter can really do is what media companies of all kinds are already doing: namely, try to build a relationship with its users around content that they care about, and then do its best to create some value around that. In Twitter’s case, it could be done by showing advertisers the strength of those relationships and hoping they’ll pay to be part of that ecosystem. Welcome to the media future, Twitter. Good luck.

Related content from GigaOM Pro (sub req’d): What We Can Learn From the Guardian’s Open Platform

Post and thumbnail photos courtesy of Flickr user Daniel Blume

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  1. Nice piece, and thanks for the shoutout, Mathew. I’d like to point out that traditional notions of media are hard to monetize, as Chris Dixon suggests, but some of the emerging newer ones aren’t as hard. When the cost of content approaches zero, as it is for Twitter and FB, and the scale of engaged users is high, big media businesses can be built. That is what we have here. Companies like HuffPo, Demand Media and About.com all found ways to get both scale and very low cost of content and have built nice media businesses on top.

    1. Thanks for the comment, David. It will be interesting to see if Twitter can build the kind of business you are describing.

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  4. If they charge Justin Bieber 1$ per month for every follower he has then twitter really does not have to worry about making money from their service Justin Bieber will himself account to 5.24 million in revenue per month

    the only people benefiting a lot from twitter are celebs as this is the best realtime platform they have to feed their hungry fans with tidbits about their lives

  5. Fritz does bring up a good point, that Twitter best serves members with an already established following through traditional media. Also, if Twitter is subscribing to the basic notion that content is king, then offering users a way to enrich those individual tweets with interesting multimedia files would seem logical.

    Unfortunately, Twitter is now trapped into serving its investors with an active ROI model, something they might not have thought about before today. It wouldn’t surprise me to see a partnership deal in the coming months to help solve that problem, but I don’t see it improving the user experience much in the process.

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