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Summary:

Twitter’s 100 million active users may pale in comparison to Facebook’s half a billion, but then Twitter isn’t really a social network — it’s a real-time information network. In other words, it’s a media entity, and the sooner it starts acting like one the better.

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In an informal chat at Twitter headquarters on Thursday, chief executive Dick Costolo talked about some of the numbers behind the service (as Erica reported earlier), including the fact that the network has over 100 million active users now. That may be a long distance away from Facebook’s more than half a billion, but the fact is that Twitter isn’t really competing with Facebook — it’s not really a social network, but a real-time information network. In other words, it’s a media entity, and the sooner it starts living up to that reality the better.

People like to lump Twitter in with Facebook as a social network, and there are definitely similarities between them — users can obviously distribute information on Facebook in much the same way they do on Twitter, whether it’s just text or links or photos or videos. But Facebook puts much more focus on the social aspects of its network, such as games and birthdays and so on, while Twitter is just short bursts of information. As Costolo likes to stress, one of the service’s main strengths is its simplicity.

That’s something Twitter gets criticized for — the fact that it isn’t easy to carry on a conversation, or put together a coherent narrative from such a rushing stream of information (which is why tools like Storify are so useful), but it is also the network’s greatest strength. It allows users to send information quickly to a large group of followers quickly and easily, whether those followers are looking for personal updates or details about a news event like the earthquake in Japan. That’s why expanding the 140-character limit would be such a mistake, as I’ve argued in the past.

It’s an information distribution system, like a newswire

So what Twitter has is this ever-growing stream of text and links and photos. In a sense, it’s an information distributor — like a newswire — except everyone who uses it is constructing their own stream of news. So how do you monetize that? You can charge for access to the “firehose” of that data, which Twitter is doing, but has mostly outsourced to companies like Gnip. Costolo said during his chat on Thursday that the company isn’t really interested in building that business much bigger than it already is, which makes sense because there’s probably not a lot of money in doing that.

You could also build analytics around all that data, the way that companies like Radian6 and others have, to try and tell brands and businesses who is saying what about them and when. That’s not a bad business, and Costolo suggested that Twitter is interested in doing more of that, or possibly partnering with others. But that’s probably not a huge business — and it’s certainly not a business that justifies an $8-billion or $10-billion market value, which is what Twitter reportedly has as a result of its latest round of financing.

So what else is there? There’s the media business — and that’s where Costolo (who used to run another information-distribution business at Feedburner) has said Twitter is placing most of its bets. In other words, on advertising. But isn’t the advertising business going down the drain and taking newspapers and old web publishers like Yahoo and AOL with it? Yes. But look at where the ad revenue is going: to social networks like Facebook and to Google, since both can target ads in a way that traditional publishers can’t.

Targeting the “interest graph” and monetizing that

That’s something Twitter can do as well, but in the process it will have to become even more of a media company than it already is. It has this huge ocean of data coming in that it can analyze and make sense of — and it can carve it up however it wants. Why leave it to others to curate the news or other content coming from Twitter using tools like Percolate (which is now powering a news offering from Reuters) or Storify or even Flipboard? Why not make it easier for users to customize the stream of information they see, the way some are trying to do with Zite or Paper.li or Summify?

If it wanted to, Twitter could easily publish customized news and information products using the billions of tweets it sees, and an analysis of the trending topics and other data that comes with that. It could even create targeted mini-networks, like the kind that StockTwits (see disclosure below) has created around a specific niche or market. That’s the kind of thing that would likely interest a lot of advertisers and brands — and likely more than just slapping a “promoted tweet” at the top of a user’s stream.

The bottom line is that Twitter shouldn’t really be looking at Facebook or even Google+ as competitors, because at heart it is an information company, not a social network. A better comparison would be something like Thomson Reuters –a company that runs a newswire, but also has targeted services around specific markets and kinds of information that advertisers and knowledge workers are willing to pay substantial sums for.

Twitter could be the crowdsourced Reuters of the digital age. And having closed a financing round of close to a billion dollars, or what Costolo described as “a truckload of money,” the company now has the financial resources to pursue that future — if it wants to.

Disclosure: StockTwits is backed by True Ventures, a venture capital firm that is an investor in the parent company of this blog, Giga Omni Media. Om Malik, founder of Giga Omni Media, is also a venture partner at True.

Post and thumbnail photos courtesy of Flickr users See-ming Lee and Si Brindley

  1. Good questions, not sure how good analogy is to crowdsourced Reuters, but for sure customizing streams of information is a hot area especially for clever startups.

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    1. Thanks, Steve — that was the best analogy I could come up with that got across what I was trying to say. I am open to suggestions for better ones :-)

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  2. HARD TIMES: Americans coming to Canada to find work … http://canuckreport.ca

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  3. Great piece, Om. I am waiting to see some company starting to ‘crowdsource’ from all sensors that are now in place and are being put in place. Twitter collects micro-blogs for aggregating News — somebody should collect micro-events from all these sensors and take social networks — that connect people to people — to the next generation to connect people to resources. Recently I gave a talk at Facebook on this topic (http://www.slideshare.net/jain49/social-life-networks-presentation-at-fb-110713).

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    1. Ramesh

      Thanks for the compliment but it should be for Mathew Ingram, the real writer of the piece.

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  4. I like the analytics idea! And I think it’s high time Twitter monetizes itself, knowing its track record and reputation in the industry. As for the ads in tweets, I actually find them quite tacky.

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  5. Think of it another way, Twitter could become the world’s largest syndicator of content.

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  6. This was great. Finally someone looking at Twitter critically with an eye towards monetization. I often feel like people report on Twitter and treat it like it’s the dotcom bubble and just because it’s there it deserves a high valuation. Twitter is not social, it’s a series of one-way information feeds that occasional reference each other.

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  7. well put. Finally somebody has seen the light on what twitter is about, get them to pay you for your brilliant advice

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  8. Never really thought of Twitter as a media company, but I guess if you look at it in comparison with Facebook and Google+ it all makes sense. The greatest strength with Twitter is that you don’t necessarily need an account to track the flow of information. Of course making a “dummy profile” to follow people makes life easier, but it isn’t a necessity. Having the constantly open, generally “free and unblocked” source of information may be one of Twitter’s biggest strengths.

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  9. Robert Jacobson Sunday, September 11, 2011

    Most of my friends who use Twitter are grown ups and this is how we already use Twitter, as a news feed and pointer to primary sources. Twitter execs, however, seem to enjoy being in the celebrity game, regularly giving kudos to non-persons who rack up lots of followers but otherwise have little to offer. Oh sure, they know the hot clubs and wild bands. So do my friends, but knowing the local clubs and bands, via word of mouth, is more useful than knowing those a continent away. If Twitter was to reward in some way those who provide value-added knowledge and provide a way to make access to that knowledge special, it would be in a good position to monetize. If it adopted that strategy, the 140-word limit probably would need reappraisal, too. Though not too much. The character constraint breeds welcome parsimony.

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  10. Robert Jacobson Sunday, September 11, 2011

    PS One way to monetize would be to deputize a team of spotters and aggregators like Smart Briefs writers, individuals with proven ability to collect value-laden tweets, and offer them some reward in return for managing channels — which, in turn, users would pay for. I would pay for a single Twitter channel on, say, transportation or politics or websites of interest or new tech and apps — rather than have to deal with hit and miss. Think of it as a very timely, very sexy ticker. I’m in, Twitter!

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