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Twittering for Profits

Twitter
Twitter

Not a day goes by that Twitter doesn't make headlines.

There's the good news: this service can help companies reach consumers, boost profits, it's a key tool in organizing social protest, and it can help politicians reach constituents.

There's also bad news: lawsuits for defamation on Twitter are just one unintended consequence of the new technology.

Twitter's popularity is exploding; there are no official stats, but it has in the ballpark of 35 million users. So how can all this attention can be turned into profits?

As of now the company has zero revenue.

Twitter's appeal and its profit potential lies in its simplicity. Anyone with a cell phone can broadcast a 140 character message. That means that the potential audience is the four billion people around the world with mobile phones, two and a half times the number of Internet users. Silicon Valley insiders describe Twitter's trajectory as starting with "the ham sandwich" conversation. Users would chat with their friends about what they had for lunch that day, where they were heading after work. As the audience grew nearly exponentially, so did the type of conversations.

Twitter acts like a news wire of sorts which users customize by following Tweets from different profiles.

CNN is one of Twitter's most popular profiles and you can sign up for headlines from every news outlet from CNBC to the New York Times and beyond.

Who needs gossip rags when you can hear from celebrities themselves? Ashton Kutcher is the most popular Tweeter and Britney Spears also has quite a following. And then there's an unprecedented way to get news on an earthquake or plane crash - simply search what other civilians are saying in real time. That search offers obvious opportunities for search ads, a la Google , but that's not where Twitter will start to make money.

Twitter's first revenue will come from helping companies use the service to better communicate with consumers; it's planning to launch premium services this quarter. Thousands of companies already use Twitter to track chatter about their brands and send "Tweets" to interested consumers and fans who are signed up to follow their news. Jet Blue used Twitter to monetize buzz after long delays. Southwest Airlines communicated to fliers after mechanical difficulties. Whole Foods tweets recipes. Banks have customer service reps Twitter customer service. Twitter co-founders say that Dell computer told them it made an incremental million dollars thanks to the site, one reason it's focusing on this business first.

Just a week ago the service launched a "Twitter 101" site for businesses looking for best practices and case studies. It hasn't started charging yet, but this is an obvious first step.

Next I'd expect Twitter to package and sell analysis about brands. And I search ads seem to be right around the corner. Co-founders Biz Stone and Evan Williams are rightfully wary of alienating users with too many ads, but it seems search ads are a great place to start.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.