Is Twitter actually making money?
Web2.0rhea outfit in 'revenue-sharing deal'
It's a question that has consumed the Silicon Valley pundit brigade for several months now: How will Twitter make its money?
And the answer may be just under their noses.
Twitter is a way of bombarding the world with an endless stream of self-serving mini-messages. According to the click mavens at Hitwise, it's now the 84th most visited site on the web, and co-founder Biz Stone says the company sees twice as much traffic through its APIs.
But its 140-character "Tweets" aren't conducive to advertising. And since it's always been a free service, the pundits can't imagine Twitter ever making money on subscriptions.
Nonetheless, in mid-February two venture capital firms force-fed the company $35 million in funding - even as the world endures the worst economic downturn since The Great Depression. The assumption was that these firms were banking on an eventual acquisition by a web giant like Google.
Then, just a week later, Twitter announced an SMS deal with Canada's Bell Mobility.
Twitter has long offered users the ability to send and receive their Tweets on cell phones via SMS. But at the moment, this perk is only available in certain parts of the world. The company can't always afford it.
When you send a Tweet, you send it to Twitter. And then Twitter forwards it to all your "followers." So if any of your followers are reading Tweets on SMS, Twitter must pay to send them. In August, the company quit sending SMS Tweets in the UK because things were getting too expensive.
"Mobile operators in most of the world charge users to send updates," the company said. "When you send one message to Twitter and we send it to ten followers, you aren't charged ten times—that's because we've been footing the bill. When we launched our free SMS service to the world, we set the clock ticking. As the service grew in popularity, so too would the price."
But the company continued to offer SMS Tweeting in the US, Canada, and India, saying it had established relationships with carriers so that "our SMS services could become sustainable from a cost perspective."
In November, the service was stopped in Canada as well. But now Twitter has swung some sort of deal with Bell Mobility. And though Twitter has yet to officially confirm, the Canadian mobile operator makes a point of telling The Reg it's a "revenue sharing deal." In fact, they said it multiple times. But they wouldn't say more.
Big telecos have been known to play fast and loose with their language. But it would appear that Twitter now generates enough traffic that it can negotiate a cut of an operator's text revenues. And Biz Stone seems to allude to this phenomenon at the end of his blog post about the Bell deal, mentioning Kevin Thau, the man famously brought in to actually make Twitter some money.
"One of the driving ideas behind Twitter is to extend the power of a real-time network to mobile devices everywhere through the simple technology of SMS," he writes. "Right now, the world can update Twitter via SMS but only folks in the US and Canada can receive these timely updates via SMS. Working with Bell Mobility in Canada is a first step towards expanding complete SMS functionality to all of Canada and everywhere else in the world."
"Our recently hired Director of Mobile Business Development, Kevin Thau is working hard to bring full Twitter SMS to your country. In fact, he's in Europe right now trying to replicate our success with Bell Mobility."
Neither Stone nor Thau responded to requests for comment. But it's worth noting that Bell Canada is now charging 15 cents - yes, 15 cents - for each Tweet sent and received. That's about a penny for every ten characters.
Initially, the carrier said it would charge the fee even if users already had a "bundled" texting plan, contradicting Stone's blog post. But after Bell customers raised a stink in the press, the company backed down. Now the 15 cents will only be charged if the user doesn't have a bundled text plan or users exceed their plan.
So Twitter may not be pulling in as much revenue as it might have. But according to Bell Canada, there is indeed Twitter revenue. ®
This story has been updated to clarify Bell Canada's charges on Tweets.