TOPICS > Economy

Twitter Is Everywhere Now, but Can It Make Money?

June 14, 2011 at 12:00 AM EDT
From the Navy SEAL raid that killed Osama bin Laden to Rep. Anthony Weiner's scandal, Twitter has been in the news recently for helping break news. While the social media giant's popularity has soared among politicians, movie stars and people around the world, can the micro-blogging service make money? Spencer Michels reports.

GWEN IFILL: Next, the impact of Twitter.

Politicians, comedians and Hollywood figures all seem to be tweeting, to famously mixed effect. But at the root of all this micro-blogging activity is the question of whether Twitter is ultimately a viable business model.

NewsHour correspondent Spencer Michels has our report.

CHRIS TAYLOR, Mashable: His first tweet was, “Helicopter hovering above Abbottabad at 1:00 a.m. is a rare event.”

SPENCER MICHELS: If Osama bin Laden had been on Twitter, he might have known about the helicopters in his neighborhood.

Chris Taylor, San Francisco bureau chief for a news website called Mashable, followed closely those first tweets that preceded bin Laden’s death, broadcast on Twitter by a tech-savvy Pakistani annoyed by the late-night sounds of helicopters.

CHRIS TAYLOR: Then, a few minutes later he tweets, “Go away, helicopter, before I take out my giant swatter.”

He had no idea that he was saying these things for the ages.

SPENCER MICHELS: Twitter, the San Francisco-based social media service that started as a way for friends to update one another in 140 character-sized messages, was inadvertently breaking one of the biggest stories ever.

CHRIS TAYLOR: What happened with the news of Osama bin Laden’s death was a defining moment for Twitter in a lot of ways, and both in positive and a negative sense.

It did reveal some of the limitations of the service, because people were checking their tweets, and, yes, Twitter got the news first. But, at the same time, a lot of people realized, hey, I want more information than this can supply.

SPENCER MICHELS: Twitter hit the headlines again for a very different kind of story when it was revealed that Congressman Anthony Weiner used the service to post embarrassing pictures of himself aimed at several young women. What he apparently didn’t realize, and the Abbottabad tweeter did, was that everything on Twitter is public.

For all the attention Twitter received after it broke the news of the death of Osama bin Laden, the company still faces serious questions about its future and the way it does business at present.

There’s no denying it’s a popular service doing business on many fronts. At the ballpark, fans of the San Francisco Giants receive continuous tweets from the team’s social media director. In the streets of the Bay Area, Twitter and other sites that connect with Twitter are the way people find a fleet of food trucks, including Fiveten Burger. The customers are alerted to the truck’s location by tweets sent out by the cook and truck owner Roland Robles, who uses his phone to say where he is.

He has 700 people who get his tweets, or as they say, who follow him.

ROLAND ROBLES, Fiveten Burger: I’m not even a computer guy. I do it all on my phone because I’m not — I don’t sit at a computer or anything like that. I’m always cooking. We usually do bars at night, so we will say which bar we’re going to be at and which day of the week, and what corner we will be at tomorrow morning.

SPENCER MICHELS: Robles may be an exception. Most Twitter users are young and tech-savvy.

WILLIAM PAOLI, Twitter user: I like that you can keep in touch with people that you wouldn’t normally have access to, like, you know, either celebrities or entertainers.

SPENCER MICHELS: But some analysts have asked whether Twitter has a business plan. A private company, it doesn’t disclose its revenues, which have been estimated at $50 million a year.

It has been growing very fast, from eight employees five years ago, when it started, to more than 450 today, and 3,000 projected within two years. It is about to renovate a big San Francisco building to accommodate the expected employee explosion.

And the number of tweets, messages sent via Twitter, has reached 155 million a day. The 140-character maximum is just below the international limit on text messages for mobile phones, so they can be used everywhere.

Twitter is a young, hip company. There are almost no phones in its offices. The staff uses, what else? Twitter, texts and e-mails. Its co-founder Biz Stone says the future looks bright.

BIZ STONE, Twitter: We know where we’re going you know, in the short-to -medium term, and we know where we want to get in the long term. And we know we want to be a company, an independent company, for 100 years. The truth is we’re only about one percent into the journey that will become Twitter. We’re a very young company in the grand scheme of things. And we’re just getting started with our monetization efforts.

SPENCER MICHELS: But, even at this stage, analysts point to signs that Twitter may be in trouble. One industry group says only eight percent of Americans have ever used Twitter, compared to 51 percent for Facebook.

Actual active Twitter users number far fewer than the 200 million members who at one point signed up. Among the public, even in the computer-savvy set, Twitter gets criticized for broadcasting too much trivial information.

KRZYSZTOF KARSKI, Twitter critic: Just one more thing to check, one more distraction from all the other things. I got e-mail. I got I.M. I got Skype. Twitter is just one more thing that sort of pop on my screen, and I would be bothered by it.

SPENCER MICHELS: John Battelle writes about high tech at Federated Media. He tweets often, but when it comes to receiving tweets, he is frustrated by Twitter’s signal-to-noise ratio.

JOHN BATTELLE, Federated Media: The amount of value I get out of other people’s tweets, compared to the deluge of information that is coming at me, it’s just not enough.

SPENCER MICHELS: Twitter admits that’s a problem, but Kevin Cheng, a product manager, has solved it his own way.

KEVIN CHENG, Twitter: I follow now almost 1,000 different accounts. And I don’t expect to read all of them, right? I think of it more like a stream that I dip my feet into every so often.

SPENCER MICHELS: Still, serious Twitter users have another concern. Some independent developers hoping to build applications that work with Twitter were told to stop making new programs. That sent shockwaves though the Twitter ecosystem, where nearly a million applications already exist.

But investors, like venture capitalist Kittu Kolluri, say Twitter needs to encourage other companies to build more apps — for example, a noise filter. He says Twitter has made it hard for outsiders to develop such apps. Some analysts say Twitter fears the outsiders will reap some of the advertising Twitter wants for itself.

KITTU KOLLURI, New Enterprise Associates: Twitter is truly not making — making it as easy as probably a lot of these businesses would like it to be. Maybe that stems from the uncertainty around what their business model is. How do they become a business when they grow up.

BIZ STONE: There are types of applications that we encourage people to build, and there are types of applications that we encourage people to avoid building, because it’s very likely that we will build our own. And then, in that case, they will be in a tough situation.

SPENCER MICHELS: As for growing up, writer Battelle is not sure Twitter knows where it is heading.

JOHN BATTELLE: I’m sure they have a road map. I’m not sure that that road map extends further than a year or two in terms of, you know, you have got so many employees and so many engineers, and you can only do so much.

SPENCER MICHELS: Manager Cheng says Twitter is now the fastest way to search for news and trends, and that has opened up revenue possibilities.

KEVIN CHENG: It is a search engine, in that it’s a real-time way of finding out what’s going on about what you care about and about a specific topic, too.

SPENCER MICHELS: For example, if there’s a conference you can’t attend, there’s a decent chance someone is tweeting about it.

In addition, users seek out trends, specific popular topics they’re interested in, and find out what other users are saying. And that information can be sold to firms trying to sell something.

Adam Bain is Twitter’s revenue specialist.

ADAM BAIN, Twitter: Marketers ultimately see the platform as a huge public opinion or market research vehicle. They’re looking for what people are saying about products, services, categories.

SPENCER MICHELS: Twitter intends to capitalize on that information. Currently, the company has just 600 advertisers. They pay to have their commercials, which look like tweets, displayed, marked in yellow, at the top of searches and elsewhere. Twitter only gets paid if members click on the ads, or retweet them, which they do at a very high rate, three percent to five percent.

ADAM BAIN: So, that’s what we think is unique about the platform, this massive engagement rate. Consumers actually love the ads or are looking at the ads almost like they — like they’re content.

SPENCER MICHELS: But critics say many advertisers are excluded because Twitter technically can’t yet accommodate them.

Biz Stone says, just wait.

BIZ STONE: We have figured out how to make money. It’s just that it is pretty hard right now for people to advertise, because we’re only letting in a certain number of partners. I think, once we open it up to a lot more advertisers, we’re going to — we’re going to see obviously a lot more money coming in.

SPENCER MICHELS: Rumors have swirled that Twitter may be up for sale, perhaps to Google, which has shown interest. Stone says, no way.

BIZ STONE: Twitter’s not for sale. That — and that’s what we have told Google and everyone else. I mean, the basic answer is, we’re flattered, but we’re not for sale.

SPENCER MICHELS: As for the criticism and sniping, Stone is convinced that, for a high-profile, high-tech startup, it comes with the territory.

BIZ STONE: Where a company is this exalted, wonderful, revolutionary, new — new — next new invention that everyone’s got to have, and everyone’s praising it, and then, inevitably, it gets built up onto this pedestal, only to be knocked down, and said, the management has no idea what they’re doing, you know, they’re never going to make it. And then there’s the comeback story, like Rocky, you know, coming back off the ropes, like, maybe they can do it.

SPENCER MICHELS: Twitter doesn’t disclose its bottom line, but investors have been pouring money into the company, betting that Stone may be right.