Twitter will need to think beyond advertisements and find better ways to capitalize on breaking news events if it wants to remain a dominant communication player, according to a startup and marketing expert interviewed by ReadWriteWeb.
"Their attempts at finding a revenue stream in promoted Tweets or display ads fail to take advantage of the one thing that consistently drives people to engage on Twitter: live events," said marketing consultant Drew Davis, who has been following Twitter's evolution during the past three years. "Everything from the Deepwater Horizon Oil Spill, Michael Jackson's death and World Cup Soccer - not to mention Arab Spring and Obama's Town Hall meeting are missed monetization opportunities for a platform that handles live events better than any other digital media."
Last month, a widely circulated Gawker report confirmed what most in social media circles had long assumed: Twitter is failing to make money, and that means an initial public offering of its shares could be years away.
Solutions to this problem aren't as simple as increasing the number of paid ads, which may turn off core users who use Twitter as a communication platform. And some of the blame for inconsistent revenue numbers is Twitter's own doing, as it has long made its API stream available to developers - who have, in turn, built profitable third-party apps with no remuneration to the San Francisco-based company.
If Gawker's numbers are right - and Twitter has yet to publicly dispute them - Twitter's revenue was a third of expenses last year, and 2011 isn't off to much better of a start. Twitter will need to reverse that trend or become yet another dot-com that didn't.
Big News Could Equal Big Profits
Davis said Twitter doesn't have to wait for big news events like the Penn State scandal or the death of Osama bin Laden to profit. Small news stories break on Twitter every day, and the site is increasingly being used to "cover" niche events that the mainstream press feels are too focused to warrant coverage.
"But let's not forget that even the small industry events and niche breaking news garner daily interest from media types, influencers, business people and pundits," Davis said. "There are opportunities everyday to focus Twitter's efforts on facilitating a more focused platform that drives the news cycle focused solely on live event coverage."
The key will be for Twitter to become more nimble: in spotting news events, evaluating their accuracy, and presenting on-the-fly opportunities to advertisers. Too often now, big news events break on Twitter, only to be verified as false a few minutes later. Fake celebrity deaths are an almost-weekly occurrence on Twitter, giving the platform a boy-who-cried-wolf status when celebrities really do die.
Davis even suggests Twitter may find revenue if it's more proactive in verifying information sources.
"Given the exposure these events garner, individual experts, content creators, journalists, even brands could pay to ensure their Tweet stream is a credible source - even, perhaps, abiding to some guidelines to ensure they report accurately," he said. "Earning and then paying for the 'trusted source' label will improve the value of the content created, as well as the platform's long-term viability as a source of information and insight rather than a marketing tool or spam haven."