In Twitter's Scoble Problem, a Business Model

116 Comments

Twitter, our favorite tool for narcissism and the eponymously named San Francisco company behind the service may not have a business model, but it surely has the buzz. Whether it is their new round of funding or their inability to keep the service running — the blog world loves to twitter about Twitter.

After talking to some of sources, I have a theory that could help Twitter solve its scaling conundrum and also help the company make money. (I am sure there are others who are thinking along those lines.) And in order to do that, I will use fellow blogger Robert Scoble, who has over 25,000 followers, as an example.

Robert is the perfect embodiment of what is wrong with Twitter, but he also offers the best hope for the company to figure a way out of their current infrastructure-scaling conundrum. I am not picking on Scoble, but using him as an example of “extreme” user who can put any system through a major stress test. Leo Laporte is another such extreme example, and has 37,000 followers on Twitter.

First let’s start with: What is the problem? Instead of using my words, lets go with Twitter’s self-acknowledged infrastructure problems.

Twitter is, fundamentally, a messaging system. Twitter was not architected as a messaging system, however. For expediency’s sake, Twitter was built with technologies and practices that are more appropriate to a content management system.

First, I am glad to see that they are not passing the blame onto their hosting providers, like Joyent. They have recognized a fundamental problem with their service, as pointed out by Assetbar in an earlier post, who wanted to offer a proxy service for Twitter.

The way Twitter is architected, when Scoble sends out a “tweet” it is sent to 25,000 of his followers — whether they are checking it from a desktop client, a mobile phone, Chat client or on the web. The message goes into a database, which then figures out how those messages are to be delivered to each of the followers. This causes the database to behave like an overweight man who gorged on a buffet at local Chinese restaurant.

Dare Obasanjo explains how it stresses out the database in his post, and correctly points out that by giving ability to add an unlimited number of followers, Twitter might have brought all the troubles on to themselves. Facebook, on the other hand, is smart to restrict you to 5,000 friends. Why? Because to process the social graph of 5,000 friends is compute-intensive, and costly.

Anyway, to put Scoble and his Tweets in context, let’s assume for a minute that he always has 25,000 followers and he sent them 12,000 updates which are all 140 characters long, the maximum size allowed by Twitter. Again, hypothetically speaking, assuming each update is 100 bytes, then 12,000 updates generated used up 30 GB of data. (12000 updates * 100 bytes)* 25,000 = 30000000000 (30 GB)

So here we come to the good part. This massive database of followers is what Twitter should turn into a business. Twitter should charge Scoble, Leo, me, Michael Arrington and anyone else who has more than 100 friends and followers. How about something simple? $10 a month for 1,000 subscribers. 25,000 subscribers means someone like Scoble should be paying them around $250 a month.

Let’s take it a step further. Twitter should limit people to 500 free messages a month. Any more should come in a bucket of, say, 1,000 messages for $10. Businesses like Comcast that want to use the service for commercial reasons should pay for the service, and so should startups like Summize, which want to build their businesses based on Twitter’s API.

This would also fit the Freemium business model that Twitter investor Fred Wilson so loves. And at the same time, it would help Twitter overcome its abhorrence for adding advertising to the messages. I think many of us have a lot to gain from the service: My alerts about my posts on the system are a form of advertising for my work, and generate enough attention that paying for the service makes lot of sense.

There are some who are going to argue that this will kill the service. I don’t think so. First of all, average people don’t have 25,000 followers. Most have about 25-50 friends and possibly an equal number who are a degree removed but are still part of social environment. I think that for the average person Twitter will remain free. I think offering a premier-tier service will help stop abuse of the system by curbing the random following that has become rampant on the system. It will force many of us with excessive number of followers to be more selective. By doing so, Twitter is also going to help lower the noise and make the system more usable. This will give them time to figure out how they are going to become a real messaging-based company.

Will Twitter be brave enough to make such a move? Chances are, no: They are stuffed with VC dollars and signs of wild growth (including outages) can help them flip the company, making it someone else’s problem. Still, I wanted to throw it out there. It is a holiday weekend, after all!

Recommending reading:

* Dare Obasanjo on Twitter and its scaling issue.
* Hueniverse: Scaling a Microblogging Service.
* Twitter-proxy: Any Interest?

116 Comments

Alex Osterwalder

I remain amazed that the business model question only arises after a long time of existence. As fundamental entrepreneur it still puzzles me that you can build, let them come and then decide on the business model…

kamla bhatt

Great post. I am not sure if the subscription model will work in this web 2.0 world where the community of users have a high degree of influence.

Kamla Bhatt

David Mullings

Getting paid for generating traffic to a site is like getting paid by the phone company for generating phone calls – makes no sense.

(1) Twitter is a communication service – you either pay for communications or have it ad-supported. Companies don’t pay YOU to use their platform (let’s not bring up Live Search).

(2) Traffic is not Revenue – Twitter has to do all the work building the application and then monetizing it. You obviously get value from using it so what ever happened to PAYING FOR VALUE?

William Volk

This is BACKWARDS. Scoble should be getting REVENUE for generating all that traffic. The solution is to monetize the other side of this. The answer is to have every 10 twits received be a 140 character ad. Cut the content creators in on the cash generated.

geekmommy

It’s an interesting notion – but one that fails in the long run.
It’s not just “a-listers” like Scoble et al who would fall under this. You probably have *zero* idea who I am, but I have over 1500 followers right now. Where did they come from? Got me. But to tell me that I have to pay for their right to see my tweets is also off.

The analogy that we “Pay to receive phone calls. Pay to receive texts.” is also flawed… because I only give my cell # to those I want to have it, so technically, I have control over that. But anyone can add me on twitter, and my only recourse is to block them.

Seems like an easy way to silence someone would be to have hundreds of folks follow them – then oops, they can’t afford it anymore.

Yes, I’m sure Scoble, Arrington and Calacanis pay considerable amounts for their blogs – because it’s their business. But not everyone on twitter with more than 100 followers is the same.

That said, I’d be more than happy to pay for the service if there were an option. But I’d say a better model off of what you propose is ‘free accounts are limited on the number they can follow and who can follow them – premium accounts are unlimited’ – for that, I’d pay $10-20 month.

Mark Sigal

For what it’s worth, here is an attempt to articulate a tiered model along lines I was suggesting yesterday. Idea is that current ‘basic’ service remains free but a ‘structured’ post service is premium service for online brand builders and commercial businesses.

Twitter-nomics: Envisioning Structured Tweets
http://thenetworkgarden.com/weblog/2008/05/twitter-nomics.html

Tried to keep consumer, small biz, scoble and procter & gambles of world in mind.

Mark

David Mullings

(1) Raising money from VCs is NOT a business model.

(2) The money Twitter has now should be used to FIX the current architecture so it works better.

(3) A “business” needs a “business model” and Twitter has none.

Bearing all that in mind, I agree in principle with Om’s idea of a tiered service instead of depending on ads. Why do so many people believe that advertising revenue is the greatest business model ever? Selling something to people is far better.

A tiered service where you start off with 100 followers free, then pay for additional blocks of followers allows you to scale at your pace, control your costs and limit the number of followers to what your pocket can handle.

If you want to follow someone and their limit is maxed out, then YOU should pay for the privilege since it is that valuable to you. As a promo, Twitter could let people like Scoble and the “A-list” that help to make the service popular keep their current followers and charge new followers.

Entities that generate money will use twitter to generate revenue through promotion – promoting a blog post (you have ads on the blog, sell a book you wrote, etc.), a book, a product, brand awareness, while the non-revenue-minded will use the free version (until they figure out how to actually make some money).

If something is valuable, paying for it should not be a problem, unless the culture has not become “I want it free and expect it to be perfect”.

Joshua Davey

This is not an original idea. Many people have discussed this before and I’m sure twitter has thought about it but they want to think outside of their structural problems. It sounds like this business model only exists to support a failing infrastructure. This is a cop out. Fix the infrastructure and come up with a new exciting business model or someone else will.

Ryan

This is a *possible* solution for a business model, which *might* make money, if it wouldn’t lose users (which probably would). However, how does this solve the technology problem?

You can have the best business model, but if you can’t deliver the content, whats the point?

Michael

I don’t think it would make sense for Twitter to charge for how many followers you have, that doesn’t make much sense to me since I have no control over how many people follow me. It might make sense for them to charge for how many people you follow, but I think your pricing is a little off, I think it should be much cheaper, something like $24 per year or so, that’s $2 per month and to most would be fine.

On Facebook you can’t have anymore than 5,000 friends and I think some people would actually pay $24 per year to have more (Leo Laporte for example). I think 5,000 may seem low on Twitter though, something more like a 1,000 friends seems like a good place to start charging.

I do think though that people who already have that many friends on Twitter shouldn’t be charged for it, only the people who are new, because if you do charge the die hard users who already have that many friends there would be some sort of a revolt.

Duane Storey

I’m not sure I buy how you describe twitter under the hood. Granted when Leo updates his status it goes into a database, but I have a hard time believing that automatically translates into 37,000 updates immediately. Granted the mobile portion is a push type system, but they should really punt on that and only do mobile updates every 10 minutes or so. For the rest of the work due to Leo’s update, it’s most likely only done when one of his subscribers logs into twitter, or their client polls using the Twitter API. The latter is probably where a lot of the traffic comes — that is all these clients, in an effort to seem speedy, are probably hitting the servers every 30 seconds and asking for updates.

A quick and dirty temporary solution would be to implement a simple caching mechanism that stores all data for at least 5 minutes in a static file instead of hitting the database every time that user requests status updates via the API or from the web page.

In terms of having a pile of subscribers, the difference is on Facebook you can determine who follows you. On twitter you don’t really have that ability, short of blocking people you don’t want. So it’s hard to put a cap on it since you have no control who those people are.

Dave Asprey

The sad fact is that without some form of payment for either publishers or subscribers, Twitter is bound to follow the path first blazed by Usenet, then email, then the web itself. Call it the Path of Spam. Each of these services was inundated by marketers who took advantage of artificially zero/low costs to steal a piece of someone else’s time and attention.

Entrepreneur Magazine quoted me on this topic in March of 1995, when I said, “If you exploit it (a medium), it’s gone.” I was talking about Usenet at the time, right as Canter & Siegel unleashed their evil. By June of that year, Usenet was toast – 90% spam.

The reason a medium becomes polluted is because there is no cost,so people don’t think before they send. Think of email. For every message you send, you get 1.86 back. It’s entirely unsustainable – empty your inbox today, and it will be 1.86 times more full tomorrow (assuming your friends still empty their inbox daily, which almost no one can do).

Scarcity is our friend because it encourages efficiency. Artificial lack of scarcity brought on by twitter’s ridiculous dotcom-style business model only leads people to fritter away what little free time and attention they have left – and they use it to take up other people’s time and attention. There is no natural predator to keep twitter in check.

The “natural predator” that could keep twitter’s signal-to-noise ratio above .000001 is money. I would LOVE it if I could charge everyone I know, including my mother, $0.05/message. And I’d pay to twit with them too. Because it would clean up my mental environment enormously.

Likewise, with Twitter, if I actually had time to waste on reading vapid twitters from 1000 “friends” I followed, and if I was so ego-driven, and if my life was so boring and meaningless that I had nothing better to do with it, I would STILL want to charge – and pay for – every d*mned twit/tweet/twat that dared to interrupt my real life with one-to-many time-wasters.

Wow. I feel better. Time to gaze adoringly at my LinkedIn profile…

Meghan Whelan

I don’t see how, if someone will pay $15-20 a month for Netflix, they wouldn’t pay a similar subscription rate for Twitter. When a user locks into a subscription fee, it is a testament to the value of the service. The people who are more frequent users will opt to pay for it, and those who don’t find it as useful, won’t. There are literally dozens (maybe hundreds) of dead Twitter accounts out there. People who decided to check it out, started following a bunch of people, tweeted a few times and haven’t updated in a year. Aren’t these types of accounts STILL sucking up resources even though they are basically inactive? They’re still receiving tweets, but not being accessed regularly. A subscription service would fix this problem.

It just seems to me that any service as adored by its users as Twitter can put a price on its value without experiencing the level of migration that could potentially sink it altogether.

Bottom line. I love Netflix. That’s why I subscribe to it. There are other options. But I love Netflix. Even when I get a DVD in the mail that’s scratched and even when it happens more than once. I still love Netflix more than my other options. Same thing with Twitter. This is more about branding than people realize, I think.

Mark Sigal

Personally, I think the answer is for twitter to bi-furcate between its free “flat” messaging service and a “structured” service that allows publishing of things like business listings, product listings, maps, stock quotes, etc.

Users can opt-in/out if they don’t want structure or aren’t interested in a specific type of listings but this is better than dropping ads inline with tweets, and it allows free service to grow to ubiquity while allowing twitter to add organization, management and sharing around structure, and monetize the goodness of context.

Turns the data into information, ala the social map-lication thinking I blogged about in:

The Social Map is All About Me:
http://gigaom.com/2008/04/20/the-social-map-is-all-about-me/

Cheers.

Mark

Jennifer Laycock

I read through every single comment to see if someone had made the point I was going to make and was glad to see Jake L did above.

Why on earth would you charge people because someone followed them instead of charging people TO follow other people.

I have 1300 followers and I follow around 600. If you start charging me for my followers, I’m going to start turning people down. That doesn’t grow the system.

On the other hand, if you charge me for the 600 people I follow, I’m likely going to weed that number down a bit to the folks who add value to the conversation.

If you want to cut down on the chatter and “worthless” talk, charge people a fee for each person they follow. They’ll self-police and pay to follow the people who add value to the conversation. This will not only cut down on some of the chatter, but will build Twitter into an even stronger service because of the power of the content.

If you want to take it a step further, go with a rev share idea like Jake L mentioned. Attract people and their ideas by offering to pay them for the value they create.

But to charge people based on how many people follow them? That’s both impractical and…well…just plain silly.

Michael

How about just prioritizing the “mass audience” messages lower, rather than making everyone pay the price for the popularity of those accounts? Once you have over, i dunno, 1000 followers, you are broadcasting, not “networking”.

Jake L

I like your idea but I think it can be turned into a win-win for everyone. Followers and Tweeters

Perhaps someone has said this already, but what if… you charge the followers a small fee or micropayment to follow a person and then take this idea to a revenue share with the ‘author’ of the tweet. So I get charged 5 cents a month to follow {insert favorite interweb celeb} and that celeb makes a percentage of the earnings per month. Only users over a certain number of followers (say 250+) would qualify for the revenue sharing option. Make sense?

Example: Leo LaPorte has ~40,000 followers. If each follower payed 5c per month to follow that would equal $2,000 total revenue per month. Leo then receives 2% of that or $40. This would be applied as a credit which can be cashed out via pay pal or turned into gift cards or credits to be used to follow other people. Not a heap of money but you could play with the percentages and amounts charged.

This would keep twitter:
1) Ad Free
2) Free all around for small groups with under 250 subscribers
3) Free API for the clients that made twitter popular
4) Revenue generating for both publishers/tweeters and readers/followers and lots of revenue for twitter.

Only subscribe to the people who are ‘worth’ following or keep it small with your own group.

Just a thought.

Trevor Plantagenet

I’m not sure why Scoble shouldn’t pay $100 a month, seriously. Of course, the supertweeters are against this, and claim that they’re the reason people flock to twitter. Maybe at the beginning, but not anymore, and now they’re basically misusing it as their free publishing platform. I guarantee these guys (Scoble, Calacanis, Winer, Arrington) are paying a lot more than $100/month for their blog & bandwidth, so why not pay for their twitter audience, especially since they use twitter to spam links to their sites which they then monetize with ads. These guys are building their businesses on the back of Twitter, I hope Twitter’s VCs are happy that they’re subsidizing the businesses of TechCrunch and Mahalo.

sull

ok, i initially commented on dave winer’s blog that htis was not a good idea. but admittedly, i didnt read this post yet. still, it is not a good idea. actually, the idea alone is logical. but it ust wont work in this space for this company, twitter, inc. it certainly wont help twitter at all… even if it is good business practive to charge such extreme users… it just doesnt apply here. it solves nothing. and twitter will not and should nto be interested in such obvious mathematics. so +1 on stating the obvious… that scobles shouldnt nec have the ability to extremely stress the twitter service at no cost. and cheers to the point about how such users should adopt an etiquette and try not to tweet as much until this is solved. because really, i wouldnt tweet as much if i new it was causing so much additional strain on twitter when they are going through this difficult phase. it would be like a dos attack.

all of you popular twitter users should think about that. twitter is suffering right now. liek it or not… it is the reality. and this is fairly unique. we are witnessing a struggle with a little neat app and idea that has been adopted and evolved into a new standard internet messaging platform that apparently many find useful. it’s not about “what are you doing right now?”. it’s about communication in near-instant form across any platform and device. and twitter is not the solution for this. the next twitter is. and i for one dont mind twitter, inc. being the company behind this effort. dont they deserve to be? i predicted that Amazon would buy twitter. regardless, twitter should be the core of this new effort to get this kind of global mass messaging system stable. let twitter evolve. help twitter evolve. fuck the noise about decentralizing for now. some of that may have some relevance soon but it is not a twitter replacement concept that is needed here today.

so, all you tech-celebrities that are so smart. consider what impact you have on this struggling service. consider chilling out a bit. consider working together maturely and getting out the right vibe… and letting twitter evolve while it tries to deal with the immediate technical problems. dont chew on it and spit it out. let twitter be the solution that we all have realized is needed and wanted.

let’s look at this from a very broad and outside the box place. not… twitter should charge a few hundred dollars a month to the scobles out there. i;d rather see twitter adopt a crowdfunding effort… letting all the fans of the service chip in if needed…. if the funding they have secured isnt enough.

twitter will keep their eyes on the future. a service that governments would rely on, not just early-adopter geeks. if they dont panic and just do what needs to be done while not worsening their service as they do it… all should be fine.

anyway….
sull

Bernardo Rodriguez

The issue is architecture. It must be peer-to-peer after the first client load. That will make it scalable. It has to be free. Ad based.

David

It is almost like common sense that Twitter would charge.. right from the word go. I think it’s like a lot of services on the web currently offering free services and relying on advertising alone – can they survive? are we heading for another tech crunch (he he!)?

Of course it might be part of the Twitter grand plan – to get soooo much attention, that they can start to charge, and no one would blink.. because ultimately it cannot continue forever… no matter how much funding is provided.

I personally agree that a Freemium service is the way to go.. as you say, there are so many people who have less than a 100 followers etc, so they would continue to use it free. The comercial ventures hooking into Twitter too must pay – it seems crazy! any other type of service and you would need to pay.

Eddie LeBreton

Interesting and maybe it could work.

However, the idea reminds me of a SPAM cure suggested by Bill Gates; charge everyone a fraction of a penny for each email. For most users this would be a trivial amount, pocket change even. But for spammers, those penny fractions add up and wreck the business model.

I wonder if charging top users will wreck twitter model as well. I like reading tweets from my “unpopular” friends but I also like reading those of the big dogs, and they’re what’s really driving twitter’s phenomenal adoption.

Erik

You would charge users by number of follower? You have no control over followers unless you manually block them.

Too much friction in this solution.

Overall, not enough value in the service to pay for it.

Pushpendra Mohta

Instant Messaging (IM) networks and services have faced and worked around several of these issues over the years, both technically and financially. The gist of it is that you can trade speed for money, and/or popularity for money.

For example, at Vayusphere, we have an architecture for a decentralized/federated Twitter-like service for our financial industry and media customers that is based on cutting down features from standard IM servers and clustering certain components.

In IM terminology, Twitter is a roughly a collection of multi user chat rooms. With some simplification: To follow (“watch”) someone, you join their personal chat room/lobby to which only the owner is allowed to post (“publish”). You are allowed to join (“subscribe”) several chat rooms at the same time. The user interface is simplified to where messages from all the chat rooms you have subscribed to are delivered to you in one single stream. You can additionally send one-to-one (“direct”)IMs to people.

Multi user chat rooms break when more than a certain number of people have joined a single room. Although Twitter does not have the presence (join/leave) traffic of regular IM style chat rooms, the real-time replication of messages (fanout) contributes to the same scaling issues. For this reason, most IM servers limit the number of people who can join a room (“followers”). Members-only rooms limit who can join based on room owners preferences or acceptance of invites. Twitter could borrow from these IM concepts. There are other ideas from scaling IM services that can be cross pollinated. IM Application vendors, including us, are currently working on massively large broadcast-only rooms that alleviate the membership count issue.

AIM clients enforce rate limits on how fast a user can send messages. AOL has a commercial category of service (Bot Programs) where for certain fees the rate limits on messages/second is lifted. We have financial industry customers who use this AIM channel, say for intra-day or algorithmic trading alerts.

Most IM services, including AIM and MSN, limit how popular you are allowed to be. Not only how many people you can add to your contact list – but how many people can add you to theirs (followers). Most of you many not have noticed these, because most people do not run into these limits. Again these limits can be lifted in these networks by commercial agreements.

Another way to think of publishing Twitter updates is to the act of selecting a “Group” in your IM Client contact list, and broadcasting a message to the group. If Twitter could move the replication function out of their core service to the end users client or even to a series of edge servers on their end (“separation of concerns”) the edges could then trickle out messages at a certain rate based on negotiated commercial agreements (30GB in 1 minute vs 30 GB in 10 minutes). Commercial publishers would trade speed for money.

This is by no means an exhaustive list, and I don’t claim to know all of Twitters architecture and the changes they must be contemplating at the moment, but there is much to be borrowed from deployment experience of IM services.

There is existence proof that larger IM networks have figured out both technical and financial solutions to these issues.

pwb

Surely we can come up with better monetization schemes than selling a premium service? Ads make more sense because there would be clever things you could do with keyword bidding and location.

I’m sure there are some simple optimizations and small re-architecting that would smooth out the downtimes. I would do anything rash yet. Twitter is still very much in early adopter territory.

Om Malik

@ Mack D. Male

No this isn’t the panacea for twitter but it gives them an optimal way to bring things under control, manage growth and work of upgrading the system. I don’t think the system can handle random sign-ups/followers as it does right now.

@ Tom R

Boss I think we are going around in circles. What I am saying is that if you have to pay. then you have to be careful about managing your followers which is a good way to control growth not only on the overall network, but all on your own personal system. If you feel 25,000 people make you happy, pay and be happy about it. Or in case of you, the 1,000 people. It all depends on how you want to choose twitter – for your personal communications you can make your twitter closed. For others an open all public access is an option.

ccmehil

That is a very scary proposal, I get constant “spam” accounts wanting to follow me – I can choose to “block” them or simply ignore them – however if I have to “pay” for them to follow me how is that a benefit for me? Do I get money back if I “block” them?

Om did you think this through perhaps flip “following” and “followers”? I could understand your idea better if you said I had to pay $10 to follow 1000 people, I don’t so I would fall into the category of “not so many having to pay” but some people are following 5000 so they would pay. That would make some sense but again I think it might be a bit late in the game to add that level in.

Mike Doeff

I’m sure that Twitter could put measures in place to prevent someone from racking up a big bill if they get popular on Twitter. Simply put a limit on the number of people who can follow you under the free plan. For example, let everyone have up to 500 followers for free. 501-1000 costs you $1.99 per month, 1001 – 5000 costs you $4.99 per month, etc. They could offer an “all you can eat plan for $99 per month.

Jason Bogovich

BTW, if anyone is looking for a fantastic blogger, research associate, inventor, coder, business model innovator with a multi million dollar successful track record in innovation hit me up at my name over at Gmail.

Jason

Jason Bogovich

I think that Twitter should move to a P2P model where each client whether through the API or not must have an encrypted mongrel session running and some logic to move the bits through the path of least resistance. Twitter could keep a master database of everything that’s happening, and have most of the CPU work take place off campus.

There are also some interesting discussions taking place about using XMPP to augment the service. Overall, Twitter has a good problem to solve. They must higher some big guns to get the architecture moving in the right direction.

I have to disagree about the business model. It should be free. Twitter could make a huge chunk of change if they integrated relevant advertising based on a user’s updates and location. I think the heavy API services should be helping out with money though, especially if they plan on monetizing it.

-J

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