Twitter Business Model - Case Study Example

1. Product Distribution Model The incoming of the second media age and multiple digital platforms has created new societal trends and business opportunities through the multimedia business model, which has challenged pre-existing methods of information dissemination (Volmer & Precourt, 2008). On the other side of the spectrum, the digital era has redefined how the people interact with each other, thereby marking a shift in societal relationships and trends, which in turn informs cultural norms and enables innovation in building consumer/business relationships. Appurtenant to the digital revolution has been the radicalisation of communication modes, with the inception of chat rooms, email, instant messaging and blogs (Volmer & Precourt, 2008). A prime example is microblogging platform Twitter, which enables instantaneous connectivity with consumers. As such, Comm et al highlight that “businesses can harness the immediacy of Twitter to innovate and build relationships like never before” (2009, p.xiv). Furthermore, Comm et al posit that the dissemination of free and useful content through Twitter enables content providers and advertisers to build trust with consumers, which in turn increases customer retention rates and value for the customer (Comm et al, 2009). This has been enabled through the popularity of the main features of Twitter, which are 140 character tweets, retweets and the use of hashtags (Prince, 2010). The use of retweets enables a user’s message to be distributed to other users with the potential to go viral. Additionally, as a business tool, the use of twitter lists is very useful for connecting with users in a specific field on Twitter and can be useful for search engine optimisation purposes also (Prince, 2010). Therefore, in terms of the Twitter business model, there are two aspects of Twitter as a business tool. Firstly, it is a useful tool for businesses online in developing social media marketing strategies, which is imperative in light of changing consumer behaviour and multi-channel retailing distribution modes within the e-commerce paradigm (Weber, 2009). On the other hand, in terms of the Twitter business model from the owner’s perspective, as part of its popularity is due to the fact that it is free and offers a medium of expression, the growth and popularity of Twitter to a user base of approximately 75 million has led to questions about Twitter’s business and monetisation model and how it actually makes money (Godin, 2008). To start with, Twitter didn’t have a business model however in April 2010, Twitter unveiled its business model and plans for the microblogging site going forward (Niccolai, 2010). The Chief Operating Officer Dick Costolo highlighted that there are essentially two facets to the Twitter business model. Firstly, is the ability to have promoted tweets where advertisers pay for sponsored tweets which appear at the top of search results for a specific keyword (In Niccolai, 2010). The other element is the introduction of business commercial accounts, where businesses will pay for twitter accounts in return for analytical tools and posting to the same account. Currently these are in beta (Niccolai, 2010). Therefore, in summary Twitter’s business model is founded on free distribution and its ability to communicate with a massive user population, which has prompted Twitter to develop its business model for monetisation purposes and has also shaped marketing strategy for businesses in the online marketplace. 2: Demographic & Geographic Distribution of Twitter Users In terms of the demographic breakdown of Twitter users a report undertaken by Social Media Optimization highlighted that the fastest growing user group on Twitter were people under 24 and that by the end of 2009, “more than 30% of Twitter visitors were under 25” (Social Media Optimization, 2010). Figure 1 below highlights the demographic breakdown of Twitter users. Figure 1: Twitter Demographic Source: Social Media Optimization (www.social-media-optimization.com accessed December 2010) In terms of geographical distribution, whilst Twitter is worldwide and now available in different languages, the main user base is located in the United States and Europe (Social Media Optimization, 2010). This is highlighted by Figure 2 below: Figure 2: Global Distribution of Twitter Users 3: Competitor Analysis As a social media platform, Twitter’s main competitor is Facebook. Twitter’s user base is approximately 175 million however reports suggest that the growth rate of Twitter has started to slow in comparison to Facebook, whose user base is 400 million and continuing to grow exponentially (Kelsey, 2010). In 2009, it was reported that Twitter’s growth rate had fallen by 3.5%, nevertheless the 2010 statistics suggest that Twitter is growing by approximately 300,000 users a day (thenextweb.com). However, in contrast Facebook is reported to have over 400 million active users and is growing by approximately 500,000 new users a day (nextweb.com). The difference between the two is also marked by the fact that with Twitter some argue it is hard to decipher the genuine users from the exact number bot created fake accounts (nextweb.com). In contrast, Next Web reports that Facebook has stricter requirements in determining active users. Nevertheless, the statistics suggest that Twitter’s growth remains relatively healthy with an uptake of approximately 10 million per month at the current growth rate (nextweb.com). The main limitation of Twitter is the 140 character tweets and in contrast Facebook’s interface is better for publishing material and media. Additionally, Facebook has better integration with websites and the viral potential is greater (Kelsey, 2010). Alternatively, both Facebook and Twitter serve different functions and Twitter enables more direct contact with users, which from a business perspective facilitates the development of relationships with individuals (Comm et al, 2009). However, both Facebook and Twitter’s ability to connect with the community is proving troubling to Google as both Facebook and Twitter serve as search engines with Twitter estimated to handle over 600 million search queries per day (nextweb.com). Other competitors include FriendFreed, which enables users to import blogs and Reisinger argues that the ability to integrate multiple platforms on FriendFeed such as Flickr, YouTube and Twitter streams. However, whilst FriendFeed has more features than Twitter, it isn’t as popular as Twitter according to the Quantcast statistics in Figure 4 below. Other competitors to Twitter, include Yahoo and Google and MySpace which also offer messaging services and social networking. The following charts highlight the comparative performance of these networks in terms of users and demographics (figures are only available for United States): Figure 3: Twitter Compare submitting... Bottom of Form  US Demographics Updated May 2010 • Delayed - Next: Dec 2010  Source: www.quantcast.com accessed December 2010. Figure 4: FriendFeed Bottom of Form  Source: www.quantcast.com accessed December 2010. Figure 5: Yahoo Messenger Bottom of Form  US Demographics Updated May 2010 • Delayed - Next: Dec 2010  Income represents total household income. 100 index is internet average. Source: www.quantcast.com accessed December 2010 Figure 6: MySpace http://ak.quantcast.com/ wd%3Acom.myspace United States US myspace.com Bottom of Form  US Demographics Updated May 2010 • Delayed - Next: Dec 2010  Source: www.quantcast.com accessed December 2010. 4: Promotion and Unique Value of Twitter In an attempt to maintain growth and sustainability in the fickle world of social media, Twitter has unveiled its business model and is also using the popularity of social networking by phone to integrate its services on mobile platforms (Kelsey, 2010). Furthermore, it is submitted that the defining aspect of Twitter in contrast is the fact that it is ultimately a communication tool which enables continuous direct communication with the public. Whilst other social networking sites can be geared towards selling products, Twitter’s utility to business is intrinsically based on the ability to build a following and friends’ base and “become the first stop for the products or services they need” (Comm et al, 2009, p.xix). Additionally, whilst this social network is essentially a communication tool, it has also followed suit and implemented add on applications to address user requirements. This is also necessary particularly with the growth of mobile use and the increasing popularity of FourSquare and Facebook Places. However, the Twitter network additionally enables individuals to infuse the personal relationship element into business growth. A central element of the digitisation of business has been to fuel multiple distribution channels, which in turn has forced retailers to adopt a multi-retailer strategy (Levy & Weitz, 2008, p.27). Within this contextual backdrop, Twitter arguably is an extremely viable option for contemporary customer relationship management strategy as “people always prefer to do business with people they know; and they get to know them by talking to them and swapping ideas with them” (Comm et al, 2009, p.xix). Therefore, Twitter not only enables this on the Internet, the Twitter model also exemplifies the interrelationship between an increasing media influence on the public through the popularity of celebrity users and exploitation of potential business opportunities. Additionally, the popularity and unique value of Twitter is the fact that there is a universal appeal in the need for people to express their opinion and Prince comments that “this sort of carnival appeal gave way to sophisticated messaging and microblogging” (Prince, 2010). The unique aspect of twitter is limiting this to 140 characters and Prince further comments that: “The standout name in microblogging by far is Twitter. The site has cut a new path right through the overgrowth of information excess, showing all a new way to speak and be heard. Because micro posts are limited to lengths of just 140 characters or less, Twitter messages must be trim, concise and easy to digest” (2010, p12). Therefore, Twitter makes it easy provide to the point messages whilst building relationships in a more direct manner than Facebook (Prince 2010). Moreover, Prince suggests that from a business perspective “Twitter enables a message that values the customer’s time, offers immediacy of product or service availability and helps establish a brand identity via brief but easy to member messaging” (Prince, 2010, p.12). In turn, this enables messages to be retained by people more and thereby more effective as a marketing communication tool for business. Prime example of business success in terms of using twitter is the Naked Pizza (2010, p.216). Arguably the example of the Naked Pizza’s success highlights the unique value offered by the Twitter medium and underlines the point that it is heightened individual control that is the key to success of social networking models going forward and content providers and businesses must understand this to provide cater to the increasing demands of the consumer (Benkler, 2006). Indeed, Anderson suggests a radical approach to business in the online environment in “Free: the Future of a Radical Price” (2009). The central premise of Anderson’s argument is offering products for free to secure customer loyalty (2009). Anderson argues that the extent of people reached online and low distribution cost renders the “free” concept a viable business model on grounds that if a large audience number can be reached, the potential dividends are huge. Accordingly, in context of Anderson’s free proposition, Twitter’s advantage is to attract the large demographic whereby “ten per cent of a big number, is a big number” (Anderson, 2009). Therefore, whilst the circle of friends’ approach of Twitter remains relevant towards fostering personal relationships important to the contemporary consumer; the continued efficacy of Twitter as a tool to build business must account for the evolving future social network model. At present, the central defining feature of Twitter’s popularity is the intimacy of personal communication, which can be utilised to expand brand awareness and secure customer conversion rates. BIBLIOGRAPHY Anderson, C. (2009). Free: The Future of a Radical Price. Hyperion Benkler, Y. (2006). The wealth of networks: how social production transforms markets and freedom. Yale University Press. Bennett, W. L. (2008). Civic Online: learning how digital media can engage youth. MIT Press. Comm, J., Robbins, A., & Burge, K. (2009). Twitter Power: How to Dominate Your Market One Tweet at Time. Wiley Godin, S. (2008). Meatball Sundae: Is your Marketing Out of Sync? Kelsey, T. (2010), Social Networking Spaces: From Facebook to Twitter. Apress Publishing. Levy, M., & Weitz, B, (2008). Retailing Management. 7th Edition McGraw-Hill Irwin Niccolai, J. (2010 Twitter gives the lowdown on new business model. April 15 2010, retrieved at www.reuters.com accessed December 2010. Prince, D. (2010). Get Rich with Twitter: Harness the Power of the Twitterverse and Reach More Users. McGraw-Hill Professional Vollmer, C. & Precourt, G. (2008). Always on: advertising, marketing and media in an era of consumer control. McGraw-Hill Professional Weber, S. (2009). Twitter Marketing: Promote Yourself and Your Business on Earth’s Hottest Network. Websites www.facebook.com www.friendfeed.com www.foursquare.com www.myspace.com www.nextweb.com www.quantcast.com www.social-media-optimization.com. www.twitter.com www.messenger.yahoo.com All accessed December 2010. Read More