How Twitter might monetize itself (Ads & Premium Features) in 2010 without alienating users…

One of the big stories this week is that Twitter will turn a net profit this year simply due to its content sales to Google and Bing, according to Bloomberg. For a cool $25 million, Google and Bing are indexing every public tweet. Twitter’s operating expenses for 2009 will be approximately $20 million. Accordingly, Twitter will return approximately a $5 profit for 2009, which comes as a surprise to many. Currently, Twitter has no other sources of revenue. 2010 is expected to be turning point for Twitter in terms of cranking up the revenue, according to Twitter co-founder Biz Stone.  How can this be accomplished without alienating users?

Twitter is expected to generate additional revenue through a combination of advertisements and premium features.

Advertisements

Advertisements work well for Facebook, which is almost exclusively accessed through its web interface and mobile apps. Twitter, on the other hand, is more frequently accessed by Twitter clients like TweetDeck, Seesmic and others. Consequently, advertisements that simply appear on Twitter.com will probably not generate as much revenue per user as Facebook advertisements. I expect Twitter to push sponsored Tweets which would show up in a user’s all friends timeline. This would push the advertisements to every platform. The problem with this approach is that it dilutes a user’s timeline if too many advertisements are pushed. I predict that sponsored tweets will come in 2010 but they will push infrequently, perhaps once every 30 minutes.

Premium Features

I expect that current Twitter services, all of which are completely free, will remain free. If it were otherwise, users would be up in arms. Twitter can’t exactly charge for services it has been giving away, e.g., Twitter searches, RTs, etc. I think what we will see if better content management for profile pages which could be implemented on a subscription basis. Currently, only text colors, the profile pic and desktop background are customizable. I think we’ll see Twitter offer a blogger-like profile page with direct Twitter integration. So, Twitter pages will support widgets, full posts (not 140 characters), pictures, music and video. This will be an assault on WordPress, Posterous, Google’s Blogger but probably warmly received. Certainly, Twitter could charge for blogger-like profile pages but it could, instead, rely advertisements. If properly implemented, this could make Twitter a preferred platform to Facebook. Facebook fan pages are simply blue-and-white boring and are not easily customized. Business will be attracted to a platform that allows for better customization, provided that that interface is intuitive and user-friendly.

I think we’ll see a substantially improved Twitter search engine. Users will be able to limit and sort tweets by date, location (now that the Twitter location API has been updated) and other criteria. I don’t expect this addition to be a paid-only feature. This would be supported by advertising and integration with the sponsored tweets.

Implications

Twitter wants to create a more comprehensive platform, something akin to Facebook. Blogging on other platforms may become less popular. The improved search capabilities may draw users away from traditional search engines, including Google and Bing. Although they will also have real-time Twitter results, it will be a rare instance where a user who wants to find tweets actually visits a web search engine to do so when Twitter begins offering an adequately comparable or superior search service of its own.

I think we’ll see Twitter incorporate the best of Facebook. Along with this will come some challenges, including privacy issues, which has plagued and will continue to plague Facebook. Nonetheless, I think we’re in for a record-breaking, blow-out year for Twitter in 2010, provided they don’t alienate users with petty charges or significant content dilution through excessive advertising and Facebook doesn’t beat Twitter to the punch on implementing the premium features.

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