So We Cost Twitter $1,000 Per Year? Why Do They Still Refuse to Charge Us?
by
on August 14, 2008,
There are two things I want to say about Twitter today: one good and one bad. The good one is that they have finally started to think in terms of business, money and sustainability. The bad one is that they are doing it in a very peculiar way that will not be appreciated by users.
So what happened yesterday was Twitter leaving all the users outside of the US, Canada, and India without SMS notifications. The problem is that every time you send an update to Twitter and pay for one text message yourself, Twitter will have to pay for all those messages sent to your followers that have chosen to enable those mobile notifications for your updates. This definitely sounds expensive - Biz Stone mentions that the amount can be as high as $1,000 per user per year.
The difference between these three countries and the rest of the world was that Twitter had established relationships with carriers over there. And obviously “the rest of the world” means too many countries and too many carriers to negotiate with. Twitter team promises to continue trying and add new countries once they are ready but does not offer any certain deadlines or even countries.
I myself don’t live in any of the 3 Twitter-blessed countries but I don’t feel deprived for the simple reason that I have never been a heavy Twitter by phone user. I don’t really want any SMS notifications about DMs or updates from friends on Twitter when I’m asleep (and most of my friends in the US are awake) - and for urgent issues I have the phone number that is 24/7 and friends or partners who have real questions can always reach me there.
But even here in Russia I know some (not many) people who are heavily addicted to Twitter and who actually used SMS notifications for their updates. Judging by the comments on the Twitter announcement of the decision, there are quite a number of users complaining already with the most furious criticism coming from Australia.
Actually I have grown kind of indifferent to Twitter recently - we have seen so many features disabled already and we have grown to live without them. I’m pretty sure people will learn to live without this one as well, especially given the costs that text messaging currently involves even in the US.
So to me the news is not particularly bad - instead, I finally see a business-oriented thinking behind Twitter and this is already a much-needed change. After all, we’ve been talking about Twitter business model for too long already without actually seeing anything on behalf of Twitter. This is why finally witnessing them counting money is good - even if it hurts users.
But the only thing that I don’t understand is why this business-oriented thinking is directed in such a wrong way. Ok, you have chosen to share with us that every user can cost Twitter up to $1,000 per year. I guess any frustrated user will agree that this is a huge amount and no reasonable company is supposed to cover it for a free service. But why don’t you offer your users any options to compensate for it? I see at least two of them:
- You offer SMS notifications for a fee. Of course, I can hardly imagine anyone will be prepared to pay $1,000 (that is $83 per month). But I think there must be a solution: simply let your users decide what exactly they need the SMS notifications to send and receive for (something like a data plan of sorts) and pay exactly for what they get.
- You make SMS notifications ad-supported and explain it clearly to the users. In this manner if I want to get my notifications on my handheld, I agree that you will send me an ad from a local company in every, say, 10th message. If I want to continue using the service for free, I might agree to that as well. And I don’t think it’s really impossible to agree with some ad network for an exclusive service like this to cover worldwide ads.
So the bad thing about this purely business decision is that Twitter has chosen not to offer users any options where they seem to be absolutely possible. Depriving people of something and sending them to competitors is not the best way to handle business decisions - especially when a painful business decision could turn into a revenue stream for the company.
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Svetlana Gladkova
Opensource 
Michael Fidler 
Why don’t they just put Google Ads to cover some of the cost ?
guess why jaiku had been sold to Google while they had _much_ better price on SMS (my assumption, not necesserily fact) and adsense in right column?
@Hassan: That was my guess as well, though I have nothing to prove it. But it was not for profite, that’s the main point.
Sean, that’s exactly what I’m talking about - they should have given the users an option to pay if they wanted instead of simply cutting everything out.
I’d pay for a pro acct
@Svetlana, I guess it may have something to do with Android, it’s being moved to google’s app engine, and I read somewhere it will be the default messaging service in android or something.
Svetlana, Google Ads are just one of the many options available. They could do so much to monetize Twitter.
Imram, simply because neither you nor I will click those ads when on Twitter and they will earn almost nothing.
@silpol: Actually Google’s purchase of Jaiku is still a mistery to me, I don’t think it was done for profit, really.
I don’t think it’s fair to rant at Twitter, when really it’s the money grabbing overcharging sucky service providing cellphone operators that are ruining it with their greed. They all charge far too much for their services as it is.
actually jaiku deserves separate posting, but my main hypothesis is simple - Google bought it for geo-data (already available) , relatively simple collection and update, and stealing it from competitors. The only missing component was community around of it - there was (and still is) only very small, compared to Twitter. And I guess they were already closer to black ink - Finnish business environment is hard, those who survive are strong.
Yes, that’s what I wrote the post for and I’ve seen quite a number of options for monetization offered to Twitter but they still seem unwilling to listen and that’s strange. It’s just that adsense is the worst option they could use, in my opinion.
silpol: You could be absolutely right here. Google is well-known for collecting all the types of services that seem to be trendy. And the community in Jaiku hardly has chances to grow in private beta so it’s obvious.
Hi Svetlana,
You said:
“I agree that you will send me an ad from a local company in every, say, 10th message. If I want to continue using the service for free”
I don’t think one ad in every ten SMS will be enough. Here’s why…
Delivery cost of each SMS is about 5 Cents US. (Average International Gateway wholesale pricing)
At that rate delivering 10 SMS costs 50 Cents USD
1 ad per 10 SMS means that each ad would have to be worth 50 Cents just to cover the cost of all 10 SMS.-No profit.
That means that Twitter would have to charge its advertisers $500 CPM (Cost per thousand Ads) just to breakeven and cover its SMS costs.
Even if you placed an ad in EVERY message- the CPM thatTwitter would have to charge -just to break even -is $50 USD CPM.
If Twitter can get the costs down to 1 cent (unlikely) and they placed an ad in EVERY SMS. The breakeven CPM would still be $10. That’s far more than the 25 cent average CPMs obtained by the likes of Facebook and MySpace. Maybe that’s doable and can make them a profit.
Also, its highly unlikely that all SMS message will be short enough to accommodate an ad. Obviously the math gets much worse for Twitter in that case.
In my view Twitter will need to run Ads in every message or offer a paid SMS service
The end.
@Eyebee: True, Twitter has to operate in the conditions that are not particularly favorable to them. But a good business has to adapt and make its operations efficient even in the worst conditions. And trying to make carriers charge less for text messaging is definitely something very similar to Don Quixote fighting mills, don’t you think so?
I think busniesses would pile into advertise on twitter, to cover the cost, why?
Geodata, advertisers will know where the readers of their “every 10th advert” are based and so busniess advertising on the service could ensure a local audience for thier message, twitter could send out an advert which is relevant to a users interest, like a local football ticket offer on a game which isn’t going to get a large ticket sale normally, if you know the user is into such and such football club?
What twitter need to do in the UK is keep it all operating as normal to keep the users, to make a business case for busniesses to pile in to cover the cost of £500 a user.
If the problem is on SMS, can you imagine the amount of busniesses that would kill for banner ads on mobile phones?
Totaly do-able.
it would only take one person a week to at least negotiate deals with carriers in the first world, appalling of them.
An observation: while some folks here are advocating an ad supported twitter SMS service many net users complain about online advertising and take measures to block it. There is no free lunch of course.
@Ian May: True, and every blogger often faces complains from readers about us having to show blogs to the eyes of our readers. The war seems to be never-ending and while some people complain about ads, others want to have evrything free and ad-supported instead.