Twitter Business Model: Analytical Essay

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Twitter, a microblogging service that allows subscribers to send “tweets” of 140 characters or less to their followers is a giant technology company that started in 2007 by founder Evan Williams. Twitter can be accessed through its website, SMS, or mobile device and has multiple features such as pinning tweets, advanced search, tags, and alerts, that made Twitter a widely regarded company to have social and political influence as it enables its users to access and spread news faster than ever- been used as a media platform and communication tool for the Iranian revelation, the Arab Spring revolutions, and entertainment events to name a few-. Despite the optimistic attitudes of its entrepreneurs, the enormous amount of investment it receives (from 2009 to 2011: 1.25 billion dollars), and the high evaluation it has on the New York Stock Exchange Market (In 2014 the company valued at 26.63 billion dollars), Twitter is challenged to generate revenues from declining advertising prices, increase its customer base, and recover its operational costs to make the company profitable.

Business Model Canvas:

1- Customer segments:

Twitter has a self-service ad platform that allows small business owners to advertise through Twitter. Large Corporation Such As Starbucks are also using Twitter advertising services. Moreover, data licensing counts for fifteen percent of the company business. These customers include analytics firms, which analyze the data to identify consumer trends; news agencies, which filter the data for breaking news stories; and even high-frequency trading firms, which use trending tickers and stories to place trades. Twitter sells its river of information to companies that try to turn its tweets into actionable data. Lastly, users that use Twitter to interact with friends and family and watch their celebrity feeds who are regular customers and constitute the bulk of its customers segments.

2- Value proposition:

Twitter delivers real-time information, empowerment, and engagement that stimulate innovation and idea exchange. These tweets also have a set of embedded metadata such as location, time and topic. Furthermore, users can also aggregate their messages by using the hash-tag keyword that triggers access to all tweets with that particular hashtag. This drives a sense of community, affinity and collaboration.

User Benefits – Users share content with the world, get real-time and relevant content in return and also get to participate in conversations with people through tweets or messages.
Advertiser Benefits – Viral global reach, unique ad formats, real-time connection with the audience.
Data Partner Benefits – Access, search and analyze data and generate insights to monetize.

3- Channels:

Customers can access Twitter through the following options; Websites, Desktop apps, mobile aps, SMS, and Twitter API.

4- Customer relationships:

Twitter provides additional support for customers who want to optimize the server for their business by attracting specific target segments that most relate to their product or service. The partner program links a customer to ad partners that have enterprise tools and expertise to help create and manage high-quality ads with advanced features and capabilities. Another option for customers is using the data partners that would help make well-informed decisions, study past behaviors to predict future trends and to engage most valuable audience. In addition, regular users have a direct communication line with the Twitter app and website, it was described that the app and the website to operate as a self-taught website or an app that customers find easy to comprehend and use.

5- Revenue streams:

There are two main revenue streams for Twitter: A) Advertising: There are three main ways for a company or an individual to advertise o n Twitter: by promoting a tweet that will appear in people’s timelines, promoting a whole account, or promoting a trend. B) Data licensing: The micro-blogger sells something known as the ‘firehose’, its public data, which often adds up to about 500 million tweets each day. Companies can dive deep into the data to analyze consumer trends and sell their insight to other brands and companies.

6- Key resources:

The platform of Twitter is perhaps the most crucial resource as it has. As twitter would use the service to build and expand its customer base. Specifically, the network allows connectivity and communication between people that would not have otherwise would be connected without twitter. The technological advancement that Twitter launches and updates is also a crucial resource for the network, as it helps the network compete in the digital social media circle.

7- Key activities:

Since Twitter’s major resources are its platform and technological advancement; key activities include maintenance and the development of these resources. It can be summarized as website and app development and maintenance. Another activity is the maintenance of user data for that Twitter stores, analyzes, shares, and uses Big Data from its platform.

8- Key partnerships:

a) Search Vendors: Twitter licenses full feed of public tweets to search engine vendors such as Microsoft (Bing Social), Google (Google Realtime), and Yahoo. This helps in enabling real-time search and discovery.
b) Device Vendors: Twitter partnered with Apple to enable deep integration of Twitter in iOS5 mobile operating system for iPad, iPhone, and iPod touch. This means users can tweet directly from Apple apps such as Camera, Photos, and Safari, along with third-party apps such as Flipboard, Livingsocial, and Instagram.
c) Media: Twitter has entered into partnerships with companies such as Mass Relevance and Crimson Hexagon to help media companies and brands deliver compelling Twitter integration to their users more easily. This can help media companies capture real-time reactions to the important news. Though these partnerships are not major source of revenue, they help in expanding user base. Additional visibility drives further growth for Twitter.
d) Mobile operators: Twitter has partnered with Telecom operators across the globe to enable users to send and receive tweets from mobile phones using SMS.

9- Cost structure:

A) General and administrative
B) Sales and marketing
C) Research and development
D) Cost of sales or Revenues

Empathy map for Twitter main customer’s base:

Think & Feel: I feel connected “ my friend favored my tweet. Excited knowing a favorite artist coming to my city. Worried, saw sad news somewhere in the world. Think about the content being shared.

See an ad of Starbucks, Lyft, or Whole Foods among others. News Channel Account tweet about war in Yemen, and to promote one’s own tweet., and a list of Trending Hash-tag worldwide or one’s country.

Hear: Follow me on Twitter, from friends or public figures on other social media accounts. Follow us on Twitter from other businesses that you just visited their business or purchased a product or a service from. You didn’t hear about it? It’s trending on Twitter from a friend or coworker.

Say or Do: Retweets, favorite, create a hash-tag, tweet negatively about a company, service, or a person while tagging them, and share a meme or a link to a video.

Pain: So much to be updated about, and so many opinions, might feel attacked or afraid to share your own opinion.

Gain: Feel connected to friends. Feeling up to date with world news.

Business Model Patterns:

Twitter uses a multisided platform that it serves multiple distinct but interdependent groups of customers such as data licensing companies, business owners, and regular customers who use the network to communicate with friends, family, and public figures. The strengths of Twitter’s current business model is first their use of technology to create and maintain meaningful relationships within its customer segments, whether it’s a regular customer to another regular customer relationship, or business to regular customer relationship, it creates immediate value to all their customer segments. A second strength of Twitter is the ability for users to target their message to a specific audience, this can be done through the hashtag feature that focuses on a topic or based on other elements such as location. Third, Twitter customers can use Twitter as a marketing tool to advertise and communicate with their own business customers free of charge, which untimely expands Twitter’s customer base

A shortcoming of Twitter’s business model is one linked to their user data and privacy. Customer data is one of the most crucial parts of Twitter’s business data, for that Twitter shares Big Data with third parties for analytics purposes such as better-targeted advertising efforts and promotions. However, customers of Twitter would also share information about what they are doing, their location, what music they are listening to, and products they have been purchasing, among many of personal information that puts a risk of customers being spammed. Another shortcoming of Twitter’s current business model is that there is no solid revenue model – Being ad-free to a lot of small businesses that can use the platform to post their product features, pictures, or videos with no subscription fee. Even though Twitter does charge companies for advertising and promotion, it fails to charge the small businesses for utilizing the platform free of charge. Twitter is initially employing the traditional Cost Per Mile (CPM) model, which involves an advertiser paying for their advertisement on a per-view basis, so it would cost X per one thousand views.

Alternative business model:

An alternative or a modification to the business model would address a previous shortcoming of Twitter’s current business model, which is the limitation of revenue on its current advertising strategy. Instead, they can offer a service that is described as ‘resonance’. Resonance is a system that incorporates how many times a tweet is viewed, retweeted, replied to or added as a favorite and in turn assigns it a score. If a user is not interested in a link they simply do what they have always been doing and ignore it. If the resonance score for a tweet is low, it will be dropped from the system and the advertiser will cease to be charged. This in principle seems to be a system, which will work well for all parties concerned, the user is not bothered with the ad and the advertiser can rethink their strategy without wasting further money.

In addition, Twitter can implement a feature where customers can link their credit card to their Twitter account to purchase within Twitter from the advertising shown on Twitter, where it can take a transaction fee from the company where the item was purchased. These modifications are stronger than the current model because it would allow Twitter to utilize their full offered features such as the number of retweets an advertising tweet would get or a “favorite”, it eliminates customers who might not be fully interested in the add or they might not have seen it. Simply, it helps to advertise to precisely define t and interact with their target market. Moreover, the ease of payment within Twitter means that customers can easily make a purchase without the pain of entering card information. The reason why I think these modifications would work for Twitter is that it creates value for two of its customer segments, first, advertisers would have a more efficient way to seek customers that demonstrate involvement with their ads by “retweeting” or “favoring”. Customers who would like to make a purchase through a Twitter ad would find no hassle in doing so, as their credit card information would be linked to their account in case there are interested in making a purchase. These modifications can boost Twitter’s revenue simply for these reasons, ease of payment to customers, and advertisers can reach involved customers that are more likely to purchase their offer.

The Story:

” We share a desire to be heard, seen, and understood in a world that is fast changing and where news is flashing by by the second. Here at Twitter, we stand by the people, through the Iranian revelation, the Arab spring, or through an Oscar selfie, or even to help you by selling more of these delicious cupcakes, we hear you, we see you, and we can spread your news. With Twitter, you are the story; let Twitter be your medium because Twitter enables you to share your ideas, emotions, and creativity faster and louder. Twitter now allows you to share your news to the most involved customers, with Twitter you can purchase what you like immediately, and at the same time enjoy a giggle at your friend’s tweeted meme. Be part of the murmuration.”

Business Model Environment Assessment:

Key Trends: Increase in popularity of social media usage globally (with 3.196 billion users worldwide in 2018, up to 13% increase from 2017),. Growth of social TV: video content. Customer trust declined, and peer influence rose.
Market Forces: Evolving customer expectation. The emerge of hybrid cloud IT infrastructure to reduce cost of operation Big Data and increasing demand for content security.
Macro-Economic Forces: The emerge of E-commerce markets, market globalization, Social Network continuous technological innovations.
Industry Forces: Low entry barriers, a large pool of competitors such as Facebook, YouTube, Instagram. Substitutes to social media networks are moderate, as each network would try to come up with new and innovative to its customers. Visitors constitute the main supplier to social networking sites and apps, whereas advertising companies are the largest buyers.

SWOT Analysis For Revenue Streams/Twitter:

The strength of Twitter’s revenue streams is its diversity where it can generate revenue from both data licensing companies as well as advertisers. A weakness, however, is that those revenues are challenged to make a profit with its current strategy as customers’ usage of the network are declining. An opportunity for Twitter is one regards the additional revenue it might generate if it can charge for Twitter promotion influenced transaction, it can also boost its customer base if it adds and succeed with the addition and collaboration of video content creators with their new partnerships. The threat to Twitter’s revenue stream is internal because balancing their cost infrastructure while stimulating customer involvement through technological innovation such as automated credit payment and content creation has been historically challenging for Twitter. They are known for the instantaneous nature of exchanging information; the expectation would be high from its customers to remain in speed with its current offerings as well as the new ones.

Other Consideration/Expanding on value proposition:

As discussed previously Twitter’s main challenge is to generate profit from its current business model, the main reasons are a declining price for advertisements and fewer customers using the network. Twitter can expand the value it offers to its customers: immediate credit payment and more specified targeting tools for advertisers are two modifications that can enhance the business model. Twitter can increase its value to its customers in several ways if they better understand the different and evolving needs of its customers, such as do they want larger tweet space beyond the 140 characteristics. Or do they want the ability to add short voice notes for advertisers to communicate better within their tweet space? The theme is to provide more of the current features in a simple way that satisfies all needs of their customer base.

Executive Summary:

Twitter offers its multi-customer segment a platform where people can enjoy and be part of a network that delivers real-time information, empowerment, and engagement that stimulate innovation and idea exchange. Their use of technology helps create and maintain meaningful relationships within its customer segments that make Twitter the powerful social network it is today. However, Twitter has struggled to generate a profit and its current business model shows little guidance in how to make the giant company profitable in the long run. One of the main issues the report aims to address is its revenue streams as it seems to be shrinking due to decreasing customer base participation and the fall of its advertising prices. In my report I have discussed a modification to Twitter’s business model where it focuses on two suggested ideas: 1) To offer its advertisers the resonance model to advertise that depends on customer involvement, it is a system that incorporates how many times a tweet is viewed, retweeted, replied to or added as a favorite and in turn assigns it a score. 2) Offer its other customer segments to link their credit card information to their Twitter account to ease the purchase process and so that Twitter can profit from taking a transaction fee from the company it helped to promote their product or service. Both of these ideas aim to add value to Twitter’s customer segment that can help boost its probability.

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