Twitter should start charging the usage of Twitter

Twitter, Inc. is a San Francisco based company that was created by Evan Williams, Biz Stone, Noah Glass and Jack Dorsey in March 2006. The company initial
ly started as a project, named “twttr”, in the podcasting company Odeo because the domain Twitter was occupied by a bird enthusiast. The company, however, took over the domain name a few months after its launch and renamed the service.  The founders formed Obvious Corporations that took over Odeo and its components.

Twitter was incorporated in Delaware and went public on 2013 trading under the New York Stock Exchange. According to company reports dated June 2016, the number of monthly active users, or MAUs, is 313 million and 79% of the accounts in Twitter belong to users outside the United States. The company has 35 offices around the world in which 3860 employees work globally. Majority of the users (89%) access the service using mobile devices and the service 40 different languages.

Users are not directly charged for the use of the service. The creation of content by users drives in more users and increases activity in the network that attracts more users and this user base exerts a pull on advertisers and platform partners, consequently generating revenue for Twitter. Precisely, advertisement is the primary revenue generation method of Twitter.

According to BBC (BBC News 2016), promoting tweets, accounts or trends are the three alternates of advertisement an individual or group have on twitter. Twitter follows pay-per-click (PPC) internet business model and charge advertisers based on the activity their content generates, including retweets. The priority of displayed content is another factor for which Twitter charges its advertisers. Other revenue generation activity includes data licensing. Twitter allows companies and organizations to analyze the data generated by its users, to conduct market research and interpret market sentiments (Rosenthal et al. 2014).

According to Forbes (Forbes 2016), the business model of Twitter is broken because the interests of its stakeholders (users and advertisers) are contradictory. Users of Twitter or any other service prefer receiving relevant content only, whereas advertisers want to reach out to every individual. Display of irrelevant adverts annoys the user that leads to the decline in the use of Twitter, the result of which would be the decline in advertisers.

Charging the users for the use of Twitter is the only viable option for Twitter to balance the user experience on Twitter and revenue generation for the company.

Pros and cons of charging individual user

Twitter faces considerable financial loses with its business structure, even with a user base over 300 million. The company had a staggering rise in its user base during the initial years. The company has reached its saturation point, and the growth in users has been stabilized. The generation of revenue by the company is dependent on its advertisers and advertisers are largely drawn to the increase of users and user activities on the platform. The advertisement activity also needs to be limited as increased adverts might affect the user base of Twitter adversely (NASDAQ 2016). Charging the users of Twitter will have prominent effect on the business.

The company will be able to generate revenue without relying completely on its advertisers and platform partners.

The independence will enable the company to shift its focus completely on its users and enhance the user experience on the platform.

Betterment of the platform will attract more users to twitter that will result in increased attention from advertisers.

Broad user base and user satisfaction will dictate Twitters demand among advertisers and generate quality revenue for the company.

Users are used to perceiving Twitter as a free service and making the service chargeable will definitely hit its user base. The affect however depends on the charge imposed and the necessity of Twitter among the users.

A subtle fact to be understood is that a user unwilling to pay a nominal fees for the use of a service as Twitter will rarely be affected by the advertisements and hence is not of consequence to the advertisers. The charge will also purge the platform from fickle users (Sanghoee 2016).

Twitter’s real-time broadcasting capabilities make it a competitor of Facebook and Google. Twitter uses interest graphs to understand and predict user preferences and provides live feedback from person of interest. The company is trying to enhance its user base by providing live streaming facilities. The company paid $10 million to own the rights of live streaming the National Football League (NFL) of the United States. This activity is supposed to spur the user base of Twitter and offer the company new users. Facilities of this magnitude will attract more users and the existing user base will not be affected by a nominal charge.

Recommendations

Charging an online service has a number of approaches and Twitter has a number of options to choose. The identification of the appropriate charging mechanism that is suitable for its business and aligned with its user requirements is vital.

Monthly or annual subscription charge

Monthly or annual subscription charge is the most common and convenient candidate. Users will pay a periodic subscription charge in this method, in order to avail the service for the period. The charge may include factor like economy of the region and popularity of the application. The simplicity of the charging mechanism makes it the most favorable technique.

On demand charge/ Charge per tweet

On demand charge or charge per tweet is another candidate. Users will pay for the number of tweets they post. This technique has the added advantage of keeping the platform clean from irrelevant content and the most relevant and important contents will be available online (Khraim 2015).

Charging the followers

A large quantity of Twitter users are interested in following certain individuals or user groups. Charging the followers offers an enormous prospect of generating revenue. Profiles of celebrities, politicians and leaders possess a huge number of followers, as Twitter offers real time feeds. This facility, however, is free. Maintenance of the traffic, however, incurs cost from the company’s end.

Ad free Twitter

Another charging technique is to let a user have an ad free experience for a price. This offers the user the option to choose from a better user experience or a free use of service with adverts.

All the techniques offer individual prospects and their incorporation depends on the business strategy of Twitter and its user preferences.

Conclusion

Twitter offers an enormous potential with its simple structure and global reach. The prospect of reaching millions of people in real time is the foundation of Twitters success. Charging the user for the use of Twitter will enable the company to be financially independent from its advertisers and platform partners; but charging the user has the prospect of affecting the user base of Twitter directly. The implementation of the charging process should be gradual and undertaken only after understanding the sentiments of its users and analysis of the market.The service however is completely dependent on its users. The loss of user base will be the end of Twitter. This aspect of the business makes the alignment of Twitter’s financial requirements with its user interests, imperative. The company has a bright future if it is able to adapt itself to market requirements and undertake apt strategies in the process.

References

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Forbes.com. (2016). Forbes Welcome. [online] Available at: https://www.forbes.com/sites/jerrybarca/2016/09/16/twitters-nfl-live-streaming-debut-commence-cable-cutting-sports-fans/#60c076f31c0d [Accessed 28 Nov. 2016].

Forbes.com. (2016). Forbes Welcome. [online] Available at: https://www.forbes.com/sites/currentaccounts/2016/07/18/twitter-should-charge-membership-fee/#3a318c3162f2 [Accessed 28 Nov. 2016].

Forbes.com. (2016). Forbes Welcome. [online] Available at: https://www.forbes.com/sites/greatspeculations/2016/02/12/twitters-business-model-remains-broken-stock-price-too-high/2/#42aa7dd5533a [Accessed 28 Nov. 2016].

Khraim, H.S., 2015. The Effect of Using Pay Per Click Advertisement on Online Advertisement Effectiveness and Attracting Customers in E-marketing Companies in Jordan. International Journal of Marketing Studies, 7(1), p.180.

NASDAQ.com. (2016). TWITTER, INC. (TWTR) IPO. [online] Available at: https://www.nasdaq.com/markets/ipos/company/twitter-inc-763922-73652 [Accessed 28 Nov. 2016].

NASDAQ.com. (2016). TWTR Income Statement. [online] Available at: https://www.nasdaq.com/symbol/twtr/financials?query=income-statement [Accessed 28 Nov. 2016].

Rosenthal, S., Ritter, A., Nakov, P. and Stoyanov, V., 2014, August. Semeval-2014 task 9: Sentiment analysis in twitter. In Proceedings of the 8th international workshop on semantic evaluation (SemEval 2014) (pp. 73-80).

Sanghoee, S. (2016). Why Twitter should charge per tweet. [online] Fortune. Available at: https://fortune.com/2014/02/21/why-twitter-should-charge-per-tweet/ [Accessed 28 Nov. 2016].