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What's interesting is that there are plenty more stories like this. Twitter -- once little more than digital heroin -- has become an incredibly useful tool for businesses like The Motley Fool. (We hopped aboard the Twitter train in September.)
The value of a movement
President-elect Barack Obama punched his Twitter ticket in April 2007. By March of this year, he had become the service's most popular poster. GOP candidate John McCain waited until September to join Twitter.
Meanwhile, Obama's digital followers -- more than 140,000 strong versus 5,500 for McCain -- used the service aggressively. Grassroots site ohboyobama.com was posting about using Twitter to get out the vote in late summer. Then, toward the end of the campaign, a second post spoke of using the service to combat "talking points."
How large a role the technology played in Obama's victory is unclear. What we do know is that the president-elect embraced technology like no other candidate before him. His Twitter following reflects that.
And his network is worth tens of thousands -- $41,150 specifically, according to Twitter follower TweetValue. No one else gets close. Certainly not me, whose meager following merits just $22. (Come on, Fools!) Not even top-five-ranked Twitterer Guy Kawasaki is within spitting distance. His 29,000-strong network is worth just north of $10,000.
Building a business via Twitter
That's saying something. Kawasaki, once Apple's (Nasdaq: AAPL ) chief evangelist for the Mac and co-founder of venture capital firm Garage.com, depends on Twitter for his latest venture, Alltop.com.
Think of it as an online magazine rack. Kawasaki calls it an alternative to Google (Nasdaq: GOOG ) , which he says is excellent when you want an answer to a specific question. Alltop is for browsers; Twitter provides the needed network effects.
"Twitter is the most important factor in Alltop," Kawasaki said when I and several other members of the Motley Fool Rule Breakers team interviewed him and other big thinkers during our recent Innovation Tour of Silicon Valley.
Kawasaki is referring to a partnering program where 170 or so Alltop fans re-tweet the site's Twitter posts. "100,000 or so people see our stuff every time we blog," Kawasaki says.
Twitter, in other words, creates network effects for Alltop since the site itself has no social component. Rather, it is an easy-to-read collection of RSS links. Call it RSS for those who'd rather not bother with code or with a reader. "Alltop" refers to how the site's categories are organized: the top stories for the top feeds, organized by topic.
But it's the network that interests me. Alltop already has a network of sorts via the sites it tracks. But its usefulness is enhanced by those of us who browse for posts worth reading, people who arrive at Alltop via one of Kawasaki's near-constant tweets.
The value of connectedness
Ethernet pioneer Bob Metcalfe first described the value of network effects in the '90s. His "law" says that the value of a communications network is proportional to the square of the number of connected users.
Knowing this is, I think, what led Microsoft (Nasdaq: MSFT ) to invest $240 million in Facebook, whose population now dwarfs France. I also believe it's why News Corp. (NYSE: NWS ) paid $580 million for MySpace.
What's Twitter worth? Let's review what we know:
- Directory site twitdir.com has identified 3.3 million Twitter accounts.
- Kawasaki found in a recent survey of Twitterers that roughly half would pay to keep the service, with most paying $5 per month.
- Amazon's (Nasdaq: AMZN ) Jeff Bezos recently invested $15 million in Twitter.
So, assuming Kawasaki is right, at least 1.65 million users would pay $5 a month to keep Twitter. That's $99 million in annual revenue before ads or any other monetization scheme.
But surveys can tell you only what might be. We won't know what is 'til Twitter reveals its plan to generate revenue. For now, all we have is Bezos. My best guess is that Mr. Kindle's stake equals 5%-10% of the outstanding shares, valuing the business between $150 million and $300 million. TechCrunch's Michael Arrington reported in April that venture firms bidding for Twitter were valuing the company between $60 million and $150 million.
Either way, Twitter is for real. A bona fide Rule Breaker that's helping the Web's wallflowers get social and create network effects on the cheap. And it'll be made more valuable by a recession that's forcing firms to spend creatively.
Think I'm wrong? Post your thoughts in the comments box below, or reply with a tweet to @milehighfool.