Biz Stone was wrong. I was, too.
"There are a few reasons why we're not pursuing advertising -- one is, it's just not quite as interesting to us," the Twitter co-founder said at a May 2009 technology summit hosted by Reuters.
Here's me, writing three months earlier:
Twitter can be far more telling and far more precise than your average focus group, and firms tend to pay as much $300 a head to create one. It's also real time, a collection of "thought streams," as TechCrunch's Erick Schonfeld wrote recently. Twitter, in other words, is the world's most interesting, multilingual zeitgeist. More so than either Google or ... CNN because of its instantaneousness -- $1 billion may even be too cheap a price to pay for Twitter.
Fast-forward to 2013. Twitter has become every bit the news delivery service we thought it could be. Stock traders don't make a move without it. And yet, despite its influence, 87% of Twitter's revenue is derived from advertising like this:
Go ahead and say it: I goofed, big-time. Twitter is a hype-worthy ad machine that acts like it doesn't know me yet pays Kim Kardashian ten grand to tweet her endorsement of your product.
Does that mean you should ignore the Twitter IPO story? Hardly. Facebook's (NASDAQ:FB) Mark Zuckerberg spent years forgoing discussions about revenue in favor of focusing on the platform. As a result, the social network now serves more than 1 billion users worldwide. Revenue soared 53% in the second quarter.
Twitter enjoys the same opportunity, in part because Stone and co-founders Evan Williams and Jack Dorsey were willing to scale up the platform before monetizing it. Usage soared and is still rising today, despite the ads. Growing the business from here means finding new ways to please marketers. Here, humbly submitted, are my top three ideas:
1. Be local. With how far the stock has dropped -- down more than 50% since its 2011 debut -- it's easy to forget that Groupon (NASDAQ:GRPN) generates more than $150 million a year in cash from operations. Why? Because local offers work. Twitter could co-opt the model via promoted replies delivered when I'm near the source of a relevant offer.
2. Content over inventory. Twitter knows my interests as well as anyone. Show me promoted tweets from advertisers who make the stuff I tweet about. (Facebook is adjusting its ad algorithm for a similar purpose.)
3. Promoted trends. Remember the days when Twitter's "trending" page told you the state of the zeitgeist? A list, or lists, of the most redeemed promotions or the most retweeted pitches might get on-the-fence users to take a closer look at what Twitter's advertisers have to offer.
Think I'm wrong? Have a better idea? Tell us about it in the comments box below.
Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He didn't own shares in any of the stocks mentioned in this article at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+, Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.
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