Why Twitter can’t make money – Digging the Start-up hole

So where to for these money churning start-ups? I’ve never quite understood the business models of some websites and I’ve openly stated that. I’m talking Digg, Reddit, Twitter etc. They are backed by big-in-the-pocket investment firms, VC’s and angel investors yet no one bothers to stop and say, how are we going to make money?

Twitter is now trying to find a way to make money. Interestingly enough they have no clue how they are going to do it. They have already stated that advertising is not an option they are currently considering for their revenue model so where will it lie?

My take on this is simple: why start a business with no revenue model whatsoever? No you might think that this is quite a narrow minded view but the main reason for thinking like this probably isn’t what you think.

Let’s use a few examples (I love my examples!) and take Facebook for example. Now Facebook has always had some type of advertising on the site and I remember the first type of ads were tower banner ads. That was pretty much it and probably didn’t make them a lot of money. But it set a precedence. Users were comfortable with the advertising. So ramping up the ads into a full blown network, although not the most successful, didn’t put too many people off because it has always been there.

Same with Google. I’ve always known Google with two columns, one for organic and the other for sponsored links. Of course at some stage it was just organic search but the ads were put in quite early on, showing a defined revenue model and the users happily accepted it.

On the other hand you’ve got other start-ups like Twitter. These guys have built a massive following and have in no way monetised it. The negative effect isn’t in the fact that they are not making money now but the inability to easily implement a revenue model in the future. Taking the earlier examples, their revenue models crept up early on and didn’t cause to much of a flutter among the users. However Twitter has always been a free, non ad-obtrusive service with a host of loyal followers. Throw in a need to charge for anything and their loyal base will be kicking and screaming. This is their own doing.. they dug a hole from day one.

You can find clear evidence of this when reports came through of an agreement to form Twitter TV and Twitter’s most famous user Ashton Kutcher, made the following statement: “Wow I hope this isn’t true. I really don’t like being sold out. May have to take a twitter hiatus”. This shows any sign of Twitter trying to profit from their micro-blogging service, they are shunned by their most loyal and popular “Tweeters”. I can’t help but feel that if they implemented some type of revenue strategy from day 1… it may not have been so difficult.