Since Twitter emerged as a communications tour de force with millions of users, the question has been: “How’s Twitter going to make money?”
Apparently, it’s a stupid question. In fact, it’s the stupidest question in the world.
According to Fred Wilson, whose venture capital firm, Union Square Ventures, has a stake in Twitter:
“It’s like the stupidest question in the world: How’s Twitter going to make money. It’s like ‘How was Google going to make money? Eventually, Google was going to make money and they figured out how to do it and they figured out a great business, and I think the same thing is true with Twitter.”
With all due respect, Fred, that’s a dumb answer.
First, Google got lucky when it “borrowed” Bill Gross’s pay-per-click model that he was using at Overture. Until then, Google was scrambling to find a way to make its ultra-cool search engine into a business.
Second, asking how Twitter is going to make money is not a “stupid question”, especially within this environment when VCs are demanding their portfolio companies generate revenue and cash flow.
In my view, the longer Twitter waits to become a business, the more room it creates for people to get tired of Twitter, competitors (Yammer, Present.ly, QikCom, etc.) to emerge, etc.
Admittedly, Twitter may find itself swimming in cash when it unveils its business model – be it advertising, a white-label version for business users or a premium version with additional features (Twitter could pull a Google, and borrow some ideas from Pownce).
But to suggest that asking how Twitter is going to make money is a stupid question is off-base. It’s a logical, pragmatic question.
Think about it: How many other sectors are there in which you can launch a business with no clue about how to make money based on the idea if you get lots of “customers”, you can eventually figure out a way to generate revenue?
For more, check out Silicon Valley Insider where Henry Blodget also tackles the “stupid” issue. He suggests Twitter will thrive financially because people are “obsessed” with it.
To his credit, Fred Wilson offers a mea culpa for his quote: “It is not the stupidest question in the world. It’s a terribly important question. But I don’t think it’s the most important question facing Twitter right now. Twitter has yet to cross the chasm to mainstream usage. It’s not immediately obvious to anyone why they should use Twitter.”