How can a company that is not yet profitable, be worth so much? Clearly, the value is in its potential.
Twitter has added more than 100 million members this year, thanks largely to a focus on its mobile apps but also because of a redesign of the site that has tried to make the site easier to browse. “You don’t have to tweet to be a great Twitter user,” says co-founder Evan Williams.
But while the growth has been extraordinary, it’s taken time to work out exactly how Twitter will make money। Having launched ‘Promoted Tweets’ in April - a service that, for a fee, gives certain tweets more prominence on Twitter, the company followed that with ‘Promoted Trends’ and ‘Promoted Accounts’. The company added a do-it-yourself advertising page earlier this week so that it can sell ads more efficiently.
Over time, Twitter hopes to charge its advertisers based on the ‘resonance’ of their tweets - a metric that takes into account retweets, @replies, clicks on links and many more of the ways that Twitter users can interact with a tweet. And so far, it appears, companies are buying into the system.
There could be problems in store, of course. For example, the fact that HP owns the #Apple tag on Twitter raises questions about whether companies should be able to ‘own’ rival brands within the service but those things will be ironed out.
More of an issue will be the response of the Twitter community at large once advertising becomes more active and widespread. Will they object? Twitter is about to find out.
If its users are upset, that could turn out to be business model in itself. Perhaps Twitter could charge its users a subscription fee to turn the ads off?
