A while ago I posted on businessgeek about my lack of faith in the Twitter business model. Essentially the advantage that Twitter has at this time is their users, and the obvious way to capatalise off this is with advertising. Unfortunately though the nature of Twitter is that generic advertising will not work with this service, however I have been giving it some thought since I wrote that article and I think there is a way they could monetise themselves.
When I say that generic advertising will not work, I believe there is an avenue for specific classes of marketing that will not only work on the service, but already are, even if this is not being monetised. Preaching to the converted is an important marketing function even if it is one that is often neglected in a companies marketing mix. The most likely person to buy from you is usually one that has bought from you before and keeping engaged with that customer is to engage them in regular low level communication. Keep them informed of what they can do with your product so they get better value out of it and include information on other products they may be interested in.
Twitter offers a way to do this in a non-intrusive, opt in way. People with a customer or fan base can offer a service where they provide a stream of information interspersed with messages that are relevant but could drive to a sale. This stretches outside of specific product interactions into other service, fame and consumption offerings. Twitter is attractive to those that want to connect to users because it is easy and non threatening, the user must opt in to receive the feed. It also has a ready user base particularly for those with a technical bent to their offering. The biggest advantage though is the information that also flows the other way as it is a two way communication method but limited to 144 characters so they it is hard for them to be overwhelmed with information they cannot process.
The two way nature and the forced brevity are the advantage Twitter has over RSS which otherwise could deliver the same result. 144 characters is also one of the attractive features to encourage people to sign up to feeds. They can be aware that they will be marketed to, but also know that the message must quickly get to the point and therefore take minimal effort to consume. The user knows that if the owner of a feed goes beyond what that user is willing to tolerate they can simply unsubscribe which is a strong incentive for marketers to adhere to a social code of conduct. The user is selecting the areas they want to be marketed from based on their direct areas of interest. As such it is a relatively poor method to derive new customers but one that potentially allows you to connect well with existing ones.
A look at the top 10 Twitter accounts by followers shows how this works as each of these people are using Twitter to sell things. Obama is looking for votes, Calacanis is after Mahalo traffic, Scoble is selling himself, CNN is obvious, and the rest have media (podcasts, video, blogs) they want to promote. As with most good marketing, it is generally not a cynical attempt to blatantly market, it is simply a method to connect with those that are interested in you and if there was not a payoff these people would not likely engage in the activity.
How can Twitter monetise this though? Essentially by charging a delivery fee for Twitter messages. For a given month number of posts, multiplied by number of followers gives the total number of messages delivered from which a fee is calculated. There of course needs to be a level that is free as this ensures that a user base is attracted to the service and will actually use it. Twitter should probably also offer exemptions to specific users who help to drive additional users to the service.
While this is not a perfect or complete method after a lot of thought it is the only way I can think of where the service can derive revenue without severely annoying their user base. Classic web advertising will destroy the service, but charging advertisers to directly communicate with customers that want to hear from them will charge those that get direct measurable benefit from the enhanced relationship with their customers/audience.