Predicting Twitter’s Best Business Opportunities

Last week, Twitter’s original CEO, Jack Dorsey, confirmed he was re-joining the company to head up product development. Dorsey returns to Twitter to correct some mistakes and address backlash from vocal digerati and, more importantly, from members of the Twitter ecosystem. Blogger complaints killed Twitter’s QuickBar, an iPhone app feature with a badly executed advertisement. Soothing the companies trying to build businesses around Twitter APIs will be more difficult. Twitter partners and competitors alike want to see how Dorsey will align Twitter products with its best business opportunities.

Dorsey laid out some of his early thinking at a Columbia University appearance. He conceded Twitter needs to be clear about its platform and product direction, and advised third-party Twitter developers to stay away from mainstream client apps. Rather, they should focus on integrating technologies like geolocation, recommendations, filters and mobile sensors. Actually, Dorsey acknowledged that Twitter client maker TweetDeck was great for a minority of high-value Twitter power users. Twitter itself, he said, should focus on attracting and serving more mainstream users — the ones that are consumers of Twitter content rather than creators.

Serving Mass-Market Consumers

Developing for the masses will help Twitter continue its evolution from an incestuous microblogging tool for techies, journalists and social media professionals into something a lot like a broadcast medium. ComScore tracks about 20 million U.S. monthly users of the Twitter site (undercounting mobile and client access, perhaps by 20 percent). One API watcher says the vast majority of Twitter accounts follow fewer than 10 others. Twitter must fix that if it’s going to bring value to mainstream content consumers.

Twitter’s history leads it to focus too much on connecting users to other users, rather than users to topics. Its first-screen promotions to “see who’s here” and view “Top Tweets” link to people or brands, or to individual tweets. Popular “Trends” displayed through a local filter on a user’s personal page is more topical, and more in line with mainstream online media approaches, where current headlines, “most popular” and local news/weather/events lead. Mass sites tell me “most popular” is far more effective in generating clicks than “related items.” Dorsey should prioritize collaborative filtering over complicated content management taxonomies.

But Twitter should also collect channels of topics to help unsophisticated users follow more relevant feeds. Twitter already partners with Sulia to deliver curated topic channels to other media companies based on Sulia’s editorial and algorithmic analysis of expert content. It should use those topic and time-driven channels itself. Twitter could promote recommendations with a smarter version of Twitscoop’s real-time topic cloud.

What About Advertising?

Though its ad platform is a product, Dorsey didn’t say much about revenue generation at Columbia. He admitted it was a challenge for marketers to tie together Twitter’s three current ad formats: Promoted Trends, Promoted Accounts and Promoted Tweets. Lately, Twitter has been telling advertisers to concentrate on Promoted Accounts and Promoted Trends at the expense of Promoted Tweets that run in a user’s feed.

In theory, the site takeover approach of a Trend could mimic timely, mass-reach advertising used by portals like Yahoo and AOL to great success for movie studios and holiday-themed sales. But a Promoted Trend now is a barely highlighted little text unit. Twitter’s attempt to feature it on the QuickBar attracted derision from digerati, who complained of its lack of relevance (and who probably use TweetDeck on their desktops, anyway). A smarter play would be a flashier ad unit on the Twitter.com site, where mainstream users congregate.

Better contextual targeting could alleviate some of the complaints about relevance. (Promoted Tweets show up as a result of Twitter searches.) If Twitter doesn’t want to manage a targeted ad marketplace, it could draw on the expertise of OneRiot, a company that’s trying to build a real-time ad network for other Twitter clients.

Question of the week

How should Twitter prioritize product development?
Relevant Analyst
P1040724

David Card

VP Research Gigaom Research

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