Friday, 17 September 2010

Twitter's accidental path to monetisation

I like a challenge every now and then, and when I'm lacking them, I usually create them myself
For the past weeks and months, I've been watching and wondering about the speed Twitter moves with towards scarcity

If you paid attention in economics class, you'll have learned that scarcity is key to profit and loss

Consider this excerpt from the magnificent wiki:

Goods (and services) that are scarce are called economic goods (or simply goods if their scarcity is presumed). Other goods are called free goods if they are desired but in such abundance that they are not scarce, such as air and seawater. Too much of something freely available can informally be referred to as a bad, but then its absence can be classified as a good, thus, a mown lawn, clean air, etc.

Now read that again, please. Free = bad, it says - doesn't it?
I think that is very true. Now what becomes free? That which is in abundance:
What? Yes, if you are one of the many following Lady Gaga, according to the theory of economics  you make Lady Gaga look cheap - but I'm sure she'd love to hear that. Also, as you are one of many many many, you'll make yourself look bad. This just hit me so I'm writing it down as pun, but it'll probably show up in another post soon

Back to business: Twitter suffers from abundance and free, of course, and has done so for years. Then, when the masses started flocking in, Twitter slowly started to make it all less abundant by putting in restrictions or raising existing ones.
Some examples:
  • In 2009, Twitter removed the @replied feature, dramatically reducing traffic
  • on July 23rd, I noticed Twitter Search had gone back from 7 days to 5 days
  • During the World Cup, the usual limit of 1,500 results was set back to 500
  • The Twitter API is limited to 150 calls per hour for individual users. That is sometimes squeezed to 100 and 75 even, either to control the flow or "motivate" third party developers
All these measures are largely meant to limit the explosive growth of traffic and storage, but there's a great side-effect to all of this.
This way, Twitter is slowly making their feed scarce. This means:
  • From abundant, it's becoming scarce 
  • From bad, it's becoming good 
  • From free, it's becoming economic
That last one is very interesting, of course, and what a significant part of the world has been eagerly anticipating. Without them realising, it's happened over time though: Twitter has become a scarce economic good

Now, the time has come for Twitter to create the best Twitter application ever. Of course, being controlled by Twitter, you can imagine that it will have a few extra features only Twitter can give and get - more scarcity there.
Then, all that remains is having people actually pay to use the Twitter client, or lifting restrictions to Twitter Search - more on that in another post, but I'm thinking VIP model, trials, and a pay-per-use SaaS model

Would you be willing to pay for your Twitter use? Or can you cope without any Twitter whatsoever, at all?

2 reacties:

Aaron Templer said...

Love the thinking here Martijn. It's got me thinking about The New Scarce. Twitter's limitations hardly rise to the level of, say, saffron. But they're kind of inventing their own category in a way, thus the economic rules that govern it.

Martijn Linssen said...

Thanks Aaron! There's only one Twitter, so The Laws are kind of shakey there

Btw, I looked up saffron and it appears world production is 200 tons, whereas vanilla is 10,500 tons (pepper is 355,000 tons) - that indeed redefines scarcity there

Once the VIP model hits us, people can choose between using Twitter more and better, or just buying their way in. October 2011 will be the date, mark my words ;-)
With Twitter,

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