Twitter is growing...BIG TIME!

As I mentioned before, Twitter is without a doubt a disruptive innovation in many different aspects and specially in premium text message/short messages (PSMS). As a definition, disruptive innovation is a term used in business and technology literature to describe innovations that improve a product or service in ways that the market does not expect, typically by lowering price or designing for a different set of consumers. Twitter's traffic is growing by leaps and bounds. The latest statistics based on comScore are:

And based on the latest keynote by Twitter CEO Evan Williams, the numbers are simple staggering:

• 105 million registered users and they add 300k uses every day
• 3 billion API request a day (equivalent to Yahoo traffic)
• 55 million new tweets every day
• 600 million search queries every day
• 175 employees
• 75% traffic comes from third party clients
• 60% tweets come from third party clients
• 100,000 registered apps
• 180 million unique visitors on Twitter.com (you don’t have to be a user)
• FlockDB, their social graph database that they just open sourced, stores 13 billion edges
• They started using "Murder" a new BitTorrent platform to transfer files during development. This reduced the transfer time from 40 minutes to 12 seconds
• Made deals with 65 (telco) carriers
• 37% of active users use Twitter on their phone (@ev wants this number to be 100%)

What does this means for those companies that have their core strategy based on premium SMS? To be honest, I'm not sure. I do know that if your strategy is to offer text messages to DJs or SMS through TV tickers, then that's no a good long strategy. And as I mentioned previously, neither is a "joke" or "horoscope" subscription for $6.99. The bottom line is that it is hard as it is to fight against a trend such as Twitter, but it is even a bigger challenge to change someone minds about a brand or a product. Currently, Twitter is the de facto of users to communicate their thoughts to the world using mobile phones.

Twitter Business Model?

I have been reading a couple of articles about Twitter, simple because I believe that it is a disruptive technology to the SMS.

Two articles that really got my attention:

• Time's How Twitter Will Change the Way We Live
• The Economist's Tweeting all the way to the Bank

Both articles where really impressive and very insightful, but by the end of the day I came up with one question, how in the world are they paying for all those BILLION messages? How come companies such as Facebook or Twitter who have over 400 - 500 million users aren't profitable? Everyone is saying that they are waiting for an IPO, but I'm not sure if that's going to happen any time soon. I mean, I doubt that anyone will be OK by getting an ad on their phone.

Time's provided a great example on how Twitter is changing the way we established conversations:

Injecting Twitter into that conversation fundamentally changed the rules of engagement. It added a second layer of discussion and brought a wider audience into what would have been a private exchange. And it gave the event an afterlife on the Web. Yes, it was built entirely out of 140-character messages, but the sum total of those tweets added up to something truly substantive, like a suspension bridge made of pebbles.

Understood, but wait...someone is paying for all these standard rate messages. You see, I'm in the business of monetizing from these type of messages. I provide what people called Premium Short Messages (PSMS). Indeed, the market that controls all that downloadable content such as ringtones, wallpaper, subscriptions, etc has paid my bill. I don't hate Twitter, is a matter of fact I think is the future, just like I think the "Free" business model that Chris Anderson talked in his book is the 21st century model. However, it seems crazy to me to have such a financial hemorrhaging (the cost of short-codes, and standard rate messages is quiet high).

The Economist's article caught my attention on the amount of money that the founders have gained,

... a hacker recently leaked documents after gaining access to the private e-mail accounts of a Twitter employee and the wife of one of its founders, the blogosphere was abuzz. The haul included a spreadsheet showing revenues reaching $140m by the end of 2010, up from $4.4m this year.

Later it mentioned about the most-likely case scenario for Twitter:

Embedding advertisements in “tweets”, short text messages that can be up to 140 characters long, is unlikely to appeal to users. A better bet would be for the firm to charge corporate users for premium services. For example, it could pocket a fee from businesses for verifying their Twitter accounts, so that users following their postings would know the firms’ tweets are genuine. It could also develop a statistical toolkit that measures the effectiveness of tweets in generating sales.

PSMS beware of Twitter

I believe that a disruptive technology for the PSMS might be Twitter. It's free!! In the book, What Would Google Do? they explain how free is a business model.

Free is impossible to compete against. The most efficient marketplace is a free marketplace. Money gets in the way. It costs money to market and to acquire customers so you can sell things to them.

This is contrary to the concept of PSMS, specially for subscription. Why would anyone subscribe to a "joke" subscription where you get charged $6.99 monthly, when anyone can follow George Lopez, Dane Cook, Dave Chapelle, or even your funniest friend on Twitter for a standard rate (zero, zip, nada)? I encouraged my company to move away from subscriptions, and to start thinking on this business model, even if we currently have a "cash cow".

Another reason of considering Twitter as a disruptive technology is its simplicity. It's so simple to tweet. Even TV shows as Meet The Press, whose average viewers are not your average techie, can be follow on Twitter. Christensen's The Innovator's Dilemma explains that,

Two additional important characteristics of disruptive technologies consistently affects product life cycles and competitive dynamics: First, the attributes that make disruptive products worthless in mainstream markets typically become their strongest selling points in emerging markets; and second, disruptive technologies products tend to be simpler, cheaper, and more reliable and convenient than establish products.

It is obvious that this disruptive technology is coming - and it's coming down hard. I personally thing is going to be a good thing. The users will be getting better service, and will be more in control. We are looking forward to Twitter specially for Latin America.