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ThinkMobile: Twitter Ecosystem Growing Up

NEW YORK -- Twitter gets a lot of buzz, but it has a small number of active users compared to other social media and any business that operates on the platform depends upon Twitter's open API .

"If they shut down the API, we're done tomorrow," admitted Thomas Buchar, vice president of business development at ad service Twittad, during a panel discussion at the ThinkMobile conference Thursday. No one from Twitter was on the panel or available for comment.

That's not the only challenge Twittad could face from the platform it relies upon. So far, Twitter has only run house ads, noted panel moderator Michael Terpin, principal of Terpin Communications. But there's nothing to prevent the company from placing paid ads.

And what's to stop new entrants from copying the business model of successful players in the ecosystem? "There are no barriers to entry other than usability and virality," admitted Terpin.

There are also questions about the size of the Twitter ecosystem. Terpin said that Twitter has 7 million accounts, is growing by about 1 million each month, and that its rate of growth should increase over time. But Steve Vachani, CEO of social "inter-networking" Web site Power.com, said that in social networks, the number of active users is typically only 10 percent of the total.

Furthermore, he said new users are typically slow to become active users. "The average consumer doesn't get into it the first time," he said. "They have to sign up for it and then come back to it. Facebook has 300 million users, many of whom have never heard of Twitter and are being introduced to a Twitter-like experience."

Vachani added that Twitter's popularity with mobile users is no longer unique. He said that every social networking site now incorporates mobile phone numbers. Indeed, Facebook launched an iPhone app this week.

Survival of the innovators

Companies that use the Twitter ecosystem will need to keep innovating to survive. Buchar, whose company was founded in August, 2008, said Twittad plans to move beyond ads by offering "value added services." He said that Dell's outlet mall gained 186,000 followers on Twitter by releasing timely news about discounts, and that online clothing store Zappos.com garnered 276,000 followers by providing good customer service and by providing that service over Twitter.

There's an opportunity because some big names do not have a Twitter strategy. "Sears doesn't get it," Buchar said. "They have 300,000 employees and only 46 followers on Twitter."

For financial information provider StockTwits.com, the opportunity is all about first mover advantage. The company has added to the Twitter lexicon, said StockTwits director Phil Pearlman, by appropriating the dollar sign. Append a twit with a dollar sign and a ticker symbol, and the company will send you the stock price. If you have a comment on the market, he added, just end your twit with a pair of dollar signs.

Customers are paying for the service, he said.

As for Twitter itself, the company has been the subject of numerous buyout rumors with Web giants Facebook and Google most often mentioned as likely suitors.

Terpin noted reports that Twitter turned down a $500 million offer from Facebook, perhaps because it consisted of stock rather than cash, but said other companies might be interested in acquiring it. He pointed out that Evan Williams, who is currently running Twitter, sold a previous company, Pyra Labs (which owned Blogger), to Google.