Home Blogs Twitter’s business plan leak offers lessons for any start-up

Twitter’s business plan leak offers lessons for any start-up

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If you haven’t already been tweeted the news, TechCrunch’s editorial staff found itself in possession of over 300 private documents last month, direct from the private email account of Twitter CEO Evan Williams.

Questions of ethics and privacy aside, the contents of these documents offer some salient insights on the startup process from one of the world’s most successful digital companies (when measuring impact, let’s forgive the fact that they don’t have a functional revenue model in place yet).

After reading through the TechCrunch collection (i.e. the documents TechCrunch decided to publish), I’d like to offer several observations, that relate to start-up companies and digital media in general.

Mindset and managing overload

The extreme growth experienced by Twitter has made managing the organisation difficult.

Like any tear-away success, the founders struggled with how to react to the flood of opportunities that came their way. While sorting through the vast array of social media co-ventures now available to them, the founders realised that different mindsets translate to different perceptions about business.

Referencing a conversation with rapper Sean “P Diddy” Combs, Williams makes the following comment: “it would be hard to explain what we would be doing wrong since he thinks about business differently”. Twitter management now has a better understanding of which of these relationships are the most important to pursue but still see much of the ‘talk’ (even within their own board structure) as interruptions that distract them from developing the company.

Revenue options

For many months, Twitter has been the subject of widespread speculation on how it is ever going to make money.

There is one very good reason why venture capitalists exist and that is because some business models need massive scale before they can make ‘the numbers work’ and achieve sustainable revenue.

The team as Twitter has settled on the idea that charging more to fewer users is a good model, and they define a user as an individual who has a conscious twitter experience in a given week. The two most interesting models mentioned in the leaked documents are:

Verified commercial accounts: Twitter believes that because companies have larger spending power than individuals, and because they’re also more likely to encounter troubles with fake Twitter imposters exploiting their good names, they are logical customers for the sale of ‘Pro’ or ‘Premium’ accounts. This is interesting because unlike other Pro account models, such as Flickr, Twitter intends on selling ‘proof of identity’ rather than features or resources.

Advertising: Another model will require heavy API users to run ads. The constant, unending flow of Twitter updates, sometimes described as ‘the firehose’, can also be viewed as a valuable resource – as a search tool or place to post advertising.

To sell ‘the firehose‘ would be to provide a direct feed of every twitter message. It’s a huge flow of data. Twitter give a few companies access to it, such as Summize (who offered twitter search, before being acquired by Twitter). But it’s a very valuable feed, so Twitter is very selective about whom it offers this key to the kingdom.

Google, for example, does not currently have access to Twitter’s data. So, it must ‘scrape’ information for its blog search tool (i.e. unofficially collect the data from websites and rss feeds). In other words, Google can spider a website and index what it finds, but that’s always going to be delayed. But if Twitter is able to inform them when new updates are added, Google will then have an up to the second live stream.

Google and the marketplace

Any company the size of Twitter is going to face comparisons and competitors.

Twitter has already had meetings with Facebook, Microsoft and Google and considered the competitive impact that each of these companies could have on it, and the impact it is is having on each in return.

Google is a much larger fish than Twitter and offers far superior search products but Twitter is already responsible for a whopping 90 percent of Google Blog Search content (see my comments above about ‘scraping’). There is clearly an opportunity here to sell ‘the firehose’, but Twitter wants to ensure that searching is a better experience on Twitter itself before it provides Google with access.

Future focus

A few comments made within the leaked documents, I believe, most clearly define the future of Twitter, as far as the Twitter team see it for themselves:

1) Twitter is an information economy (and most of the access is free)
2) Williams really likes person-to-person payments as a concept (but the timing isn’t right yet)
3) Twitter should tell me stuff without searching (relates to the historical ‘track’ feature, and Google)

Purpose and definition

Lastly, like many start-ups, the team at Twitter initially struggled to define the company’s purpose but settled on the idea of Twitter as a public utility – concerned with the distribution of content as a nervous system rather than as an alert system.

Amazingly, the team had thought to ask the following question, the sort of question that separates the great from the also-rans:

“What does a completely relevant product look like for a billion people?”

If you can answer that question, I’m sure Twitter would like to know.

Ross Hill is a leading social media entrepreneur. He works part-time in social media communications for Deloitte Digital and Deloitte Innovation and has interests in a number of very successful websites and blogs, including CoverHunt.com and The Hive. He was recently chosen as one of Anthill’s 30under30. Read full profile.