The case study provides a background discussion about Twitter, social networking sites. Twitter allows users to “tweet” a 140-character text to their followers. The company was established in 2006 as a stand-alone company by the Odeo Podcasting Company. The executives of Odeo saw Twitter as an alternative source of new revenues (Laudon and Laudon, 34).
We will write a custom Case Study on Twitter’s Business Model and Advertising Revenues specifically for you
301 certified writers online
The number of individual tweets is unknown. However, experts estimated that Twitter recorded 200,000 tweets per hour in 2009 during the much-publicized Iranian rebellion. In addition, experts observe that 10% of tweeter users generate 80% of the tweets on Twitter. On top of these, the Twitter churn rate is estimated to be 60%. This implies that only 40% of Twitter users use it for more than one month.
Twitter is used to connect people through social tweets. In addition, it is used as a celebrity platform and a free public relations tool. Just like the other giant social networks, these services are free of charge. Then, how does Twitter generate its revenues? The answer to this question is unknown. The case study identifies three assets Twitter can use to generate its revenues. These assets include eyeballs per day, tweets’ database, and news distribution platform.
The case study goes ahead to discuss how these assets can be monetized. First, it suggests that Twitter should charge for video and music downloads. This will require a user to pay subscription fees for such services. However, this option is not tenable because Twitter users are currently used to free services. Secondly, Twitter can sell display or text ads on individual tweets or charge advertisers for ad messages on individual tweets. Finally, Twitter can consider charging companies to use its big data database.
Twitters business model
The business model of Twitter can be characterized in several ways. First, the model allows users of its services to express themselves by creating content and sharing it with other users. Second, Twitter is a celebrity platform as well as a public relations tool. However, according to the case study, Twitter has not been able to generate revenue from these services.
Revenue models that can work
The advertising revenue model and the subscription revenue model would work for the Twitter Company. Through the advertising revenue model, Twitter can employ strategies to promote the use of its services to generate revenue. Advertising is a significant source of revenue, and hence should be adopted by Twitter. Through the subscription revenue model, Twitter will be assured of having constant and predictable subscribers for its service (Brynjolfsson and Kahin, 57).
Twitter assets include eyeballs per day, tweet database, and news distribution platform. These assets can be monetized through subscription, ads charges, and data mining fees. A tweet can allow users to use it as a search engine (Shaw, 87). Second, it can promote “tweeting” by allowing users to get the latest news, views, or any current issue at a fee.
Impact of high churn rate on the potential advertising revenues of Twitter
The Twitter churn rate stands at 60% in a month. In most cases, people get bored when “tweeting” with friends. The churn rate is likely to have negative consequences on Twitter’s potential source of advertising revenues. This is because social media sites are poor advertising platforms. In addition, social sites are unreliable.
Brynjolfsson, Erik, and Brian Kahin. Understanding the digital economy: data, tools and research. Cambridge, Mass: The MIT Press, 2002. Print.
Laudon, Kenneth C., and Jane P. Laudon. Essentials of management information systems. Boston: Prentice Hall, 2011. Print.
Shaw, Michael. E-commerce and the Digital Economy. Armonk, NY: ME Sharpe, 2006. Print.