The Twitter You Don’t Know
The most annoying thing about Twitter is everyone’s desire to try and figure out a revenue model. Just because you don’t see it, doesn’t mean it isn’t there – it usually just means you’re a bit of a goof. Twitter had a revenue model from the beginning; their product was actually developed around the model itself. That model was SMS; it does stand for “short message service” after all.
Twitter didn’t start out to be the definition of “Micro Blogging”; that term came out of Twitters popularity, out of the way the product was utilized by its users. Twitter didn’t create micro-blogging; Twitter users did using the Twitter platform. We were limited to our character count not because it was seen as a revolutionary way to communicate, but because the SMS technology dictated it. Twitter has (or had) a relationship with telecommunication carriers that provide us our SMS on our mobile devices; for every text message they charge you for, Twitter gets a cut because of the influx in text messaging they’ve created in the market place; known as a Value-added Service Provider (VASP). For anyone that doubts this in the least, ask a SXSW attendant that used Twitter via SMS and forgot to upgrade their SMS plan; people were reporting mobile phone bills hundreds of dollars over their norm. Twitter’s original value proposition was communication via text message among small groups of people. There was an online component at Twitter.com, but the mobility of it all (pre-iPhone, pre-mass adoption of web enabled mobile phones and before their was a mobile version of Twitter.com) was via SMS.
Revenue sharing of SMS is a very popular business; one you never visually see. Commercially SMS is a massive industry, in 2006 worth over 81 billion dollars globally. SMS has an average global price of 0.11 USD and maintains a near 90% profit margin. Even Twitter usage today still shows its original foundation of an SMS model. The use of the “@” symbol for example is derived from “AT” which more obviously means “attention”. “AT” is a part of the Hayes command set. And, many mobile and satellite transceiver units support the sending and receiving of SMS using an extended version of the Hayes command set.
Some of you old school Twitter users might remember the days before 140 character limits. In the beginning, we were actually limited to 134 characters. Do you want to guess why? SMS of course. The maximum single text message size is 140 8-bit characters. Larger content (Concatenated SMS, multipart or segmented SMS or “long sms”) can be sent using multiple messages, in which case each message will start with a user data header (UDH) containing segmentation information. Since UDH is inside the payload, the number of characters per segment is lower: 134 for 8-bit encoding.
So many of those “social media experts”, “bloggers” and “web entrepreneurs” are like the hillbillies of the business word. If they can’t see it, they can’t understand it. If there isn’t an advertising or subscription model and if Google Ads are nowhere to be found, they just can’t seem to wrap their heads around the model at all. Not to say that the SMS model is a good model for Twitter; but then again, Twitter grew well beyond anyone’s expectations. It grew so fast and so large that the SMS model obviously can’t support the product; but that is what the $22 million in venture capital is for.
What I find most interesting is how Twitter really started with this strong SMS foundation but quickly grew into something more as user adoption forced it to and advances in mobile technology arose. Remember, Twitter was alive before 3G had mass appeal, before the iPhone was on the market and at a time when the Motorola Razar was the typical phone of choice; a time when mobile websites were far from common place. 140 characters wasn’t some quintessential number that sparked a revolution in blogging to create the “micro-blogging” phenomenon; it was a limitation of a popular way to use the product. If Twitter launched today, SMS capabilities might exist, but they’d be an after-thought, they’d be a nice-to-have … much like the AIM integration was. You can still find some of the original messaging throughout Twitter that references these thoughts of the past; just go to your settings and then “devices”, you’ll see “Twitter is more fun when used through your mobile phone.” This message only referenced to SMS, nothing about http://m.twitter.com or even native iPhone apps; the way you have more fun using your mobile phone and Twitter is through SMS – that’s a dated message if I’ve ever seen one. Want some more fun, now go to the Twitter.com help FAQ section under “How can I send updates to Twitter?”; there is a mention of the mobile Twitter site, but no mention of SMS … the help section being a bit more new and a bit more inline with how Twitter has adopted to the changing times.
SMS is no longer a big play for Twitter, probably not even a revenue stream anymore (I do not have that information). However, when evaluating Twitter and attempting to understand it, I think it is fundamentally important to remember where it came from and the revenue model it was originally built upon.
I am no Twitter expert, I just thought some of you might find this little reminder of what Twitter was, interesting.
- December 20th, 2008
- 12comments
- I am a proud member of the 9rules network
It’s fun to remember back to early Twitter, isn’t it? I have to call a little bullshit, though.
I may be wrong (and I often am), but if I recall correctly, the revenue-sharing SMS model only applies to premium SMS services and super-huge players (American Idol). Twitter isn’t close to the volume required to be a super-huge player. Premium SMS services are like ringtones, where the SMS effectually costs the user $3 or something like that — typically, that type of application yields the provider at least 50% of the premium fee, and the merchant takes the rest.
From what I know, Twitter hasn’t yet pulled in any revenue of any sort, and the fees they pay for SMS termination are/were in the high five-figures per month. That’s why they shut off SMS for most of Europe — they couldn’t keep the costs low enough to stop bleeding gobs of cash paying for SMS termination.
Ev has publicly claimed that they’ve never really had a revenue model for the service, but that they plan on starting to explore options more thoroughly in 2009.
I don’t know that I buy the direct link between the @ and the Hayes AT protocol. I think the origins are more just Textese than anything else. Do you have a source for that?
Of course, your observations about UDH are true, but it’s probably worth at least linking to the wikipedia article you pasted from, if not blockquoting and citing it. Wikipedia is great, but it’s still important to cite your sources.
Anyway, I hope their eventual business model takes advantage of some of the other technologies they got along with their purchase of Summize, since I think that there’s a there there. Allowing large businesses to gauge the sentiment of the masses and surface the most relevant twitter content would be lucrative and powerful. The original Summize idea, aggregating product reviews, analyzing them for sentiment, and banking on the revenue sharing, might not be a bad play-in either, though not as big, I wouldn’t guess.
I think Ev’s said he’s not very interested in advertising as a revenue model, and that makes some sense given the fact that the API is such a huge contributor to the game these days, and it’d be tough to monetize the API without killing it in the process.
To get back to the original heart of your post, though, the source of Twitter’s original appeal was the ability to post and read from anywhere, be it web, SMS, IM, or API. Early on, the API was just an afterthought among the other three, but that’s the glory of an API strategy — if it’s useful (and if the service is appealing in other ways besides the API), then the API will eventually take an increasing role as developers do interesting things with it. That’s now happened, and situations (mobile) where SMS was king before have now turned to API-based implementations.
If they were clever, this would have been part of the plan all along — offer SMS (costly) early on, to make the service immediately accessible, and hope that the API (very cheap) eventually marginalized the costly SMS service.
I bet it largely has, and while SMS may have been something that cost Twitter, say, $5/mo/user back toward the beginning, the fact that new (like @felskia) and existing users (like myself) are largely relying on web, mobile web, and API-based implementations means that Twitter may now be spending only a small fraction of that per month per user, even if SMS use stays steady from a quantitative perspective.
While the sheer volume and impact of Twitter makes it the kind of company you’d want to support, it’s that kind of cost transition that would make Twitter an attractive company to invest in.
Thanks for your comment Jackson.
It might be important to remind everyone that you can have a revenue model without actually generating revenue.
Of course, but in this case, I don’t think they had one, and I definitely don’t think it was SMS revenues. At least, if it was, they would probably be to embarrassed to admit it now, since it’s not a particularly good idea.
Isn’t Twitter sort of famous for everyone else thinking they make bad decisions? I don’t want to jump on that bandwagon, I think it is pretty impressive that the prototype was built in just two days. It was just the little internal app that could.
There is a sizable population that would point out that there are a good number of things Twitter should probably be embarrassed about.
I agree the model isn’t great, it is a very U.S. centric model — offering a free SMS service globally actually cost Twitter a good deal of money, which is why they shut that service down for the most part back in August.
Biz Stone has often referenced his “talks with mobile companies around the world” in dealings with SMS … the relationship is there for sure, especially in the U.S. (or was there).
Twitter was in talks to negotiate lower rates for the SMS termination, and try to bring down those high SMS costs. That’s most likely the relationship Ev was referencing. I’m not aware of any evidence or claims that Twitter was remotely close to generating any revenue from SMS, or even in talks that would allow it.
I actually don’t think that Twitter has made too many really bad decisions. They kept it small, didn’t overextend on features, and tried to really focus on the core of the service. They didn’t exactly develop great technology initially, but they’ve clearly been making strides there. Sure, people think they could have gone various directions, but they’re in pretty good shape now, and it wasn’t because they’ve changed directions.
I guess I was just hoping you had a valid and convincing argument for your initial thesis, as it would be interesting if they really did think SMS would be a revenue model, and you stated it as if it were fact.
I’m with Mr. Wilkinson, but I’ll be a bit more blunt: I’ll give you an “A” for a compelling post title, a “D” for defending your premise, and an “F” for what appears to be bit of Wiki-plagiarism on your part. Hardly the best way to make your case.
As for your response that “There is a sizable population that would point out that there are a good number of things Twitter should probably be embarrassed about.: I’d be interested in who the “sizable” population is, and what things those folks think Twitter should be embarrassed about.
I’m sorry, but this one breaks down pretty quickly for me.
I love how the focus gets so targeted and you lose sense of the overall point of the article. The only thing that can’t be 100% proven is whether or not Twitter ever had serious intentions to utilize SMS revenue sharing. And now that SMS as a means for web based mobile communication is essentially dying a slow death; you’ll never hear anyone admit to such a model; not a web based entity at least.
I also love the implication that I’ve essentially stolen my article from Wikipedia. This is a blog and an opinion based blog at that … I am no journalist and am held to no journalistic code of ethics. I am pretty comfortable with the fact that I am too lazy to put in a three or so foot notes for your referencing pleasure.
As copied from Wikipedia …
The article is original to me, the copying of factual data is obviously not original to me — it should be obvious to you, and from your comments it appears that it is. It was obvious to me and obvious to you, so no foul play there; hell you even knew the original source — seems like I got my ducks in a row. There was never an intent to make the assumption that those facts were my “ideas”.
Of the eight paragraphs, there are about three sentences that express factual information. This isn’t a research thesis for you to tear apart. It is simply the online version of an interesting conversation over a couple beers the night before.
And for those that really just love to pick at the details for no other reason than to be slightly annoying (I am assuming it is non-intentional, I call it a personality flaw) … I simply don’t give a shit. I don’t care if I have a few misspellings, some poor grammar, bad punctuation, bad citations or lack their of.
I am glad you came by, glad you read the article, glad you commented, glad it spark a discussion of some sort — but as much as I love to keep the discussion going, I am really not interested in the quality of my article, I am just interested in your take on the subject of discussion.
This isn’t some ultimate test to finally prove me wrong or point out what a terrible human being I am for running such a shitty blog. Just tell me if you think SMS was the foundation that Twitter was built on. Tell me if you think the evolution of Twitter and the popularity of the “140 characters” is interesting. Tell me if you think it is interesting that 140 characters has become this powerful number in the context of micro-blogging; but it was derived from technical limitations, not from human strategic thought.
Don’t be so afraid to tell me what you think as opposed to what you know. Unless you are worried some prick is going to come along and leave a snotty comment.
Sorry, I wasn’t aware that you weren’t concerned with the quality of your content.
Any discussion centers around arguments, for or against a given thesis. These arguments draw conclusions based on premises, and when your premises are flawed, that blows your conclusions/thesis out of the water.
Your thesis claims that SMS was the original revenue model for Twitter. I disputed some of your premises, backed those disputes up with some amount of reason, and therefore disagreed with your conclusions. I don’t see how any of that could bother you, or be remotely prickish.
There are multiple other ways to ensure that folks will dismiss your argument instantly, including:
- Mentioning the Nazis or Hitler
- Saying “because I said so”
- Contradicting oneself
- Personal insults
- Plagiarism, or passing off someone else’s work as your own.
That last one doesn’t only apply to journalism, and it doesn’t only apply to academia, but it applies to anyone who publishes content in any form or medium where someone other than the author might read it.
I know you’re just trying to stir the pot and generate some traffic and attention, but if you don’t care about presenting a coherent argument for a claim you make, and you don’t care about passing off someone else’s words and work as your own, then you might find you have more in common with Social Media Experts and those “designers” who copy nclud’s site than you might have hoped.
So, I hope you don’t take that stance.
It’s just a blog dude. It will be okay.
Since I’m interested in revenue models, I’ll not cover the other issues raised above and ask:
1. do you have any specific knowledge that the SMS model was Twitter’s original revenue model, or is it just speculative? (could be interesting in either case, just curious which)
2. could that SMS revenue model have been potentially viable at the time that Twitter was developed? - i.e., what level of payments from carriers would have been possible at certain volume levels, and would have been enough to offset their costs? Would love to see some hypothetical numbers for these components - I can’t really imagine that it would have been seen as viable at the time Twitter was developed, although maybe I am applying too much hindsight.
I don’t know if this whole Twiiter’s SMS sharing revenue model is true or not. But I silently read this blog for awhile now and for the most part the content and opinions are fair and accurate.
But i have to say this was the funniest blog comment War i have seen in a while AHAHHAHAHHAHA LOL
Thanks for the comment — I always enjoy a good back-and-forth with my buddy Jackson! I often refer to my last minute editing as “Jackson-proofing” — he keeps me honest and keeps me on my toes!