The Entrepreneurs at Twitter: Building a Brand, a Social Tool or a Tech Powerhouse?

MID-TERM ASSIGNMENT A Paper Presented in Partial Fulfillment of the Requirements of the Robert Kennedy College MBA Course Nr. 57582 - Entrepreneurship Prof. Francois Therin October 27, 2010

Declaration of originality of work I affirm that the attached work is entirely my own, except where the words or ideas of other writers are specifically acknowledged according to accepted citation conventions. This assignment has not been submitted for any other course at Robert Kennedy College or any other institution. I have revised, edited and proof-read this paper. th Signed the student, October 27 2010 Certification of authorship I certify that I am the author of this paper and that any assistance I received in its preparation is fully acknowledged and fully disclosed in this assignment/paper/examination. I have also cited any sources (footnotes or endnotes) from which I used data, ideas, theories, or words, whether quoteds directly or paraphrased. I further acknowledge that this written work has been prepared by myself specifically for this course. Signed the student, October 27th 2010 Word count: 1952 without title pages, index of contents, executive summary and bibliography

If you dont know where youre going, any road will get you there. The Cheshire Cat in Alices Adventures in Wonderland by Lewis Carroll

Index of contents
Executive Summary ............................................................................................................................5 1 Overview..........................................................................................................................................5 2 Twitter: Bright Idea or Real Business Opportunity? ...........................................................................6 3 Twitters Marketing Approach ...........................................................................................................7 4 Twitters Way to Profits.....................................................................................................................8 5 Bibliography ...................................................................................................................................9

Executive Summary
Proclaimed as the hottest company since Google and Facebook, Twitter introduced a revolutionary micro-blogging service in 2006 that allowed users to spread and share short messages of 140 characters (tweets) with friends and strangers subscribing to follow their communication flow (as so called followers) in order to find out what is happening right now from any point of the globe. Raising a total of US$ 155 million from investors without generating a single cent in profit or return on investment, Twitters founders Evan Williams, Christopher Isaac Biz Stone and Jack Dorsey relied essentially on their investors patience and goodwill while they were building the best product, technology and company possiblefor free. What started as the bright idea of its founders has slowly but surely developed to an unexploited business opportunity Twitter as a very trendy social tool has to monetize on. The notion that when a service is of value, it should also have a value and charge for this value was more or less ignored or remained in the background. Recognizing the importance of Twitters service to its users, endless possibilities arise how Twitter can capitalize on its popularity considering the 24 million registered Twitter users by the end of 2009 making up a technologically savvy and broadly interested user base allowing for special targeting with opt-in options and high interactivity levels as well as high levels of attention and reach. Twitters marketing approach to date has been that of evangelism or word-of-mouth marketing with viral components, supported by extensive media coverage. Considering Twitters declining user base in the last quarter of 2009, this obviously wasnt enough. Twitter has to expand its marketing and branding efforts to increase its publicity by means of embracing community, interactive and digital marketing. Twitter has to discover and implement unobtrusive and user-relevant ways to sell its audience to advertisers and interest groups. Ways to do that might comprise exclusive offers accounts, promoted accounts of different companies based on the interests and search requests of its users, sponsored trends, subscription and interest sensitive suggestions and recommendations of who to follow as well as B2B-sales approaches like selling API and basic services to large companies using Twitter for the internal coordination and update of employees as well as deepening its cooperation with the big players like Google, Microsoft and Facebook by granting their spiders and search engines free access to its users data base so that the their advertising partners can get a comprehensive placement and offering on all of these companies platforms. Twitter needs a clear strategy for its future profit generation. It needs to better understand its users and their interests, to filter and tag those users according to their online behavior, affiliations and proceedings in the daily information-gathering and decision-making on Twitter. The path to profitability for Twitter passes through delivering a more intelligent and better aligned service to its users. Only then will interactions lead to click and purchase actions.

1 Overview
Labeled by the media as the hottest technology since Google and Facebook, Twitter is an easy-to-use micro blogging service with components of instant messaging and social presence notification based on short bursts of information (tweets of 140 characters), transmitted to lists of recipients (followers) (Mark, 2010). Founded in 2006 by a small group of programmers led by Evan Williams, Christopher Isaac Biz Stone and Jack Dorsey, Twitter set out to revolutionize communication as we know it by allowing its users to share news with friends and strangers as well as to find out what is happening right now. Twitter defines itself as the most varied communication network basically representing a subscription to an index of the messages of the people one is following. Twitter differs from Facebook in the fact that Facebook users can communicate with each other only by mutual consent, whereas Twitter allows free communication, signing up and viewing of public tweets to anyone willing to open an account and log in to its platform. Another essential difference is that Twitter is mainly based on text while Facebook allows for the exchange of photos and videos. Twitter co-founder Christopher Stone identifies a greater affinity between Google and Twitter than between Facebook and Twitter, given that his describes Twitter as an information company (Mark, 2010). Another essential characteristic and differentiation of Twitter is that it is an open source platform encouraging the development of third-party applications by others (Mark, 2010). Relying mainly on its first users as well as on some Hollywood stars like Ashton Kutcher and Drew Carey to become personal evangelists for the service as well as on extensive media coverage and word-of-mouth promotion, Twitter rapidly increased its users base reaching 29 million in mid-2009 but dropping to 24 million by the end of 2009. Twitter also increased its usage during Senator Barack Obamas U. S. presidential campaign and played an important role as communication tool with the outside world during the 2008 attack in Mumbai, India, as well as during the Iranian presidential elections protests in 2009. Given that Twitter raised a total of US$155 million of funding and was valued at US$ 1 billion by the end of September 2009 without generating any considerable earnings or return on investment, Twitter will eventually have to commit to its very ambitious financial aims of generating US$ 1.1 billion in net earnings and reaching one billion users by the end of 2013. Considering that Twitter still hasnt focused on a clearly defined business model and is looking at different types of revenue models ranging from e-commerce to B2B (business-to-business) services, advertising and retailing recommended products, the companys future path remains to be decided. Important questions arise on the way.

2 Twitter: Bright Idea or Real Business Opportunity?

Twitter started out in early 2006 as engineer Jack Dorseys bright idea of a service enabling users carrying cell phones to update small groups of people simultaneously on their current situation or status by entering a short numerical code before beginning the message. Twittr Beta was launched by the spring of 2006, based on the idea of the SMS aspect and inspired by brands like Flickr and the fact that American SMS short codes were five characters long (Mark, 2010: 4). The renaming to Twitter happened later on as its developers tried to come up with the perfect imagery for buzzing your friends pocket (ibid.). Defined as a short burst of inconsequential information and chirps from birds, Williams, Stone and Dorsey finally committed to Twitter.

As so often with original ideas, Twitters founders were mainly concerned with developing the bright idea to a valuable service supporting the millions of users depending on it. The notion that when a service is of value, it should also have a value and charge for this value was more or less ignored or remained in the background. Given that investors were easily persuaded of the services worth, assuming that where you have audiences, you will make money (Siminoff in Mark (2010: 7)), the US$ 155 million injection gave Twitters founders some peace of mind, ensuring them that they had patient investors (Mark, 2010: 8) and enough funds to continue building the company. However, it is understandable that investors will expect Twitter to come up with a sustainable business model and a presentation of the ways and plans to achieve the highly set targets. Even if Williams stated to journalists to wanting to go all the way with Twitter and to have as large an impact with this service as possible, he simultaneously revealed to already be thinking of the next big thing (revolutionizing e-mail) which substantiates suspicions that his commitment to Twitters profitability isnt (and probably never was) his main concern. This clearly exemplifies the extent to which Twitters situation in 2010 reflects the past record of its founders. Given that they were working to make ends meet while pursuing their real passion on the side to find the next big thing their success came as a byproduct of their pursuit of originality, not as a fully intended and envisioned result of planned moves toward wealth. This is why Twitter is struggling to set a clear focus on revenues, almost as if the notion of monetizing on the service is degrading its noble origins. Twitters founders define themselves as entrepreneurs coming up with business or entrepreneurial ideas (cf. Mark, 2010: 2). As such, they need to recognize the importance of monetizing on business opportunities. Twitter clearly is an outstanding business opportunity considering its enormous, technologically savvy and broadly interested user base allowing for special targeting, its valuable approach of being an opt-in service with high interactivity and therefore high levels of attention and reach and last but not least a very trendy social tool. Taking into account Twitters offering of integration of other applications or web services via an application programming interface (API), Twitter is looking at a wide range of business opportunities for which it imperatively needs a sustainable strategy.

3 Twitters Marketing Approach

Twitters marketing approach to date has been that of evangelism or word-of-mouth marketing, relying heavily on users promoting its service, acting independently and freely spreading recommendations of the service to others. This type of referral marketing was complemented by clear viral marketing elements, demonstrated by waves of seemingly spontaneous outburst of tweets followed by new users subscriptions like the South by Southwest festival in Austin in 2007 where Twitter had a big break when festival participants were able to see their tweets flash across television screens in real time which lead to the triplication of tweets to 60,000 per day as participants talked about the service and the bloggers in attendance wrote about it (Mark, 2010. 5). The U. S. presidential campaign of 2008, the 2008 attacks in Mumbai, India, and the protests during the Iranian presidential election in 2009 further increased Twitters popularity as essential tool for public communication and interaction that not only spread the news but made the news. Extensive media coverage completed Twitters rise to popularity. Twitters future marketing approach should increasingly focus on community, interactive and digital marketing. Given that social media communities are the chief platforms for community marketing and considering Twitters concern about non-intrusive ways of generating revenue, community marketing with its strategy of engaging the audience in interaction, discussion and product oriented group formation is just ideal. Interactive marketing is customer-initiated and customer-controlled (cf. Kotler and Keller, 2006: 612). Marketers and their representatives must wait for customers participation and exchange willingness. Its the customers who define the rules of engagement that is they specify what information they need and when, what offerings they are interested in and what prices they are willing to pay (cf. ibid.). This approach is in total compliance with Twitters user orientation considering the companys devotion to the users experience and their commitment to building the best product, technology and company possible (cf. Mark, 2010: 6). Finally digital marketing representing all forms

of digital advertising including television, radio, Internet, mobile and other forms of digital media has to be furthered, too, in order for Twitter to increase its brands public awareness and popularity. This more traditional marketing approach is a necessary complement to Twitters coming of age as a brand and contributes to spreading its message to a wider audience of potential users.

4 Twitters Way to Profits

Twitter can definitively earn profits and capitalize on its popularity. There are countless possibilities like for example: In cooperation with select partners and advertisers Twitter can create exclusive offers accounts with special time-bound deals and promotions created solely for the Twitter community. Users can subscribe to the accounts and receive the best deals and sales discounts on particular products and services as well as - for example - VIP event invitations. Twitter will be charging its advertising partners based on the click-through-rate, the generated page views and the closed deals, of course. The whole idea would be based on the You saw it first approach giving Twitter users a sense of being special, deserving special treatment and cool deals and discounts. Twitter can initiate promoted accounts of different companies based on the interests and search requests of its users. Once Twitter starts filtering its users interests and tags them according to the consumer groups they represent, it can sell them to advertisers by means of serving them with relevant suggestions of who to follow. Organizations can then be charged based on new followers the suggestions have resulted in as well as the clicks and page views the new followers have executed. Twitter can introduce sponsored trends by means of bringing trend topics to its users attention. One example: It can display a text in the right hand column of the users interface showing Trending now: GAP jeans. Twitter can start suggesting and recommending interesting people, companies or topics to follow each time a user subscribes to following another on the platform. Similar to Amazons approach of suggesting to someone who has just purchased a product on their e-marketplace what else he might also be interested in by means of saying: Clients who purchased this also liked or purchased that., Twitter could reach out to its users in the following way: You follow @Miss_T. It might interest you that @Miss_T follows @AbercrombieNY. Or You follow @FashionVictim. It might interest you that @FashionVictim follows @OscardelaRenta. This way Twitter stays unobtrusive given that it only recommends relevant accounts and topics based on the users current interests and searches while at the same time it can charge the companies it generates more followers and traffic for. Twitter can start charging larger companies which are using its API and basic services for the internal coordination and update of employees. Twitter can deepen its cooperation with the big players Google, Microsoft and Facebook by granting their spiders and search engines free access to its users data base so that the advertising partners of Google, Microsoft and Facebook can get a comprehensive placement and offering on all of these companies platforms. The advertisement on Twitter will stay discreet and will be visibly labeled as such.

Concluding we might once again highlight the fact that Twitter needs a clear strategy for its future profit generation. It needs to deepen the understanding of its users needs and interests by means of setting up its site to mirror the steps the users go through in the daily information-gathering and decision-making process and thus identifying Twitter communities which can be sponsored and sold to advertisers. There is still enormous opportunity to fully exploit and to monetize on trends happening on Twitter. The sooner Twitter defines and solidifies its business model before someone else does, the faster and more successfully it will become an avant-garde player on the social media front.

5 Bibliography
Kotler, P. & Keller, K. (2006) Marketing Management. 12th ed. New Jersey: Pearson Education, Inc. Mark, K. (2010) The Entrepreneurs at Twitter: Building a Brand, a Social Tool or a Tech Powerhouse? The University of Western Ontario: Richard Ivey School of Business.