Marketing Case study

Twitter has taken its fair share of criticism in the four years since its launch. Users complained it was unreliable; critics called tweets frivolous; analysts warned the micro-blogging website was not serious about making money. In the past week, however, the San Franciscobased company has done much to answer its wouldbe detractors. It unveiled its revenue-making model, released impressive statistics about its size, and introduced a bevy of new products. At Chirp, Twitter’s first ever conference for software developers, which began in San Francisco on Tuesday, users and analysts said Twitter was growing up before their eyes, transforming from a ‘start-up’ to a ‘big company’. But at the same time, Twitter, which allows users to post short messages known as ‘tweets’, has provoked serious new questions about its direction, and raised tensions with both users and third-party developers who have been so crucial to its success. Most in the Twitter community believe the service, which now boasts 106m registered users, is still in the early days of its growth. ‘I think there’s going to be more opportunity now than ever,’ said Bijan Sabet, a partner at Spark Capital and an early investor. ‘Getting to half a billion users, that’s the next step.’ Twitter’s most significant move this week was the unveiling of its revenue model – an advertising system similar to Google’s highly profitable AdWords. Twitter will allow businesses to bid on keywords and have their ‘promoted tweets’ appear at the top of search results. This is relatively unobtrusive as online advertising goes. Yet among Twitter’s notoriously fickle community, some users have been rankled by the idea of the site bearing ads at all. The business plan will also potentially hurt at least one developer. Just a day before Twitter unveiled promoted tweets, Bill Gross, a seasoned entrepreneur credited with inventing search advertising, disclosed his TweetUp service, which was relying on a near identical model. This highlights a line in the sand that Twitter has drawn with its developers, who have built more than 100,000 applications that operate on the site and interact with tweets. Twitter, said co-founder Evan Williams, will focus on the ‘core experiences’ – keeping the platform up and running and implementing an advertising system. Developers should put their efforts into building specified products for niche audiences, such as applications that serve business customers, or harness the film and music communities. But even this line between the host and the apps is blurring. One of the most fruitful areas of third-party development has been in apps that allow users to manage their tweets on a desktop or mobile phone. Indeed, 75 per cent of Twitter’s traffic happens not on, but through the likes of the Tweetdeck, Seesmic and Echofon apps. Last week, however, Twitter shocked the developer community, saying it had purchased the maker of Tweetie, the most popular iPhone client, and had developed its own app for BlackBerry smartphones. This prompted an outcry from developers, who complained Twitter had pivoted from benevolent platform to aggressive competitor. ‘The strength of the reaction is a testament to the naiveté of the community,’ said Mike Hirschland, a partner at Polaris Venture Partners who has invested in Twitter developers. ‘At some point the platform is going to get deadly serious about making money, and you better get out of the way.’ That time seems to have arrived. Mr Williams said Twitter was now focused on making money from its 55m daily tweets. ‘It’s a high priority for us.’ To developers nervous that the platform for which they are building software might compete with them, Mr Williams would give no reassurances. ‘That’s part of the game,’ he said

1 Why are developers reacting so negatively to Twitter’s purchase of the maker of Tweety? What changes does this vignette illustrate?

2 Why is Twitter changing its business model?

3 What fundamentals of strategy can Twitter adopt to become more sustainable


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