A couple of months ago, Twitter co-founder Biz Stone appeared on The Colbert Report. Watch the interview below and then continue reading the blog post. Pay close attention during the latter part of the segment as Stone describes Twitter’s plans for revenue generation.
[NOTE: If you don’t see the video in your browser, wait a few extra seconds for it to load, refresh the browser window or view the original here, or if you live in Canada, view it here]
If you were impatient and couldn’t watch the whole thing, here’s a recap of the key parts, starting at about 2:55 into the video:
Stone: Twitter provides a new way of messaging. It’s really the messaging service we didn’t know we needed until we had it. You send out 140 character bursts of information to anyone who wants to receive it; they receive it in real time and that’s when some of the magic happens.
Colbert: [looking perplexed] It’s the what? It’s the what?
Stone: [matter of factly] The messaging system we didn’t know we needed until we had it.
Colbert: [astutely] That sounds like the answer to a problem we didn’t have until I invented the answer. [audience laughs loudly]
Analysis part 1
I do agree with Stone on his first sentence. Twitter does provide a new way of messaging. I wrote about it previously in Twitter: The Napster of Messaging. But after that, Stone starts speaking mumbo jumbo.
The “service we didn’t know we needed” line makes little sense. Thankfully Colbert quickly calls Stone on it almost immediately.
Later, starting around 4:30 into the video, the following exchange happens:
Colbert: Does Twitter charge anything?
Stone: It’s totally free.
Colbert: So I assume that “Biz” in Biz Stone doesn’t stand for “business model”?
Stone: [somewhat sheepishly] No. No it doesn’t.
Analysis part 2
This in my opinion was the best exchange of the interview. Colbert intentionally asks a question to which he knows the answer, only to follow up with a real zinger; an easy target, but quite effective. This does set up the context for further questions a few moments later.
The interview later continues:
Colbert: How would you make money? Are you going to make money off of this? How?
Stone: Yes we are. We are going to become a strong, profitable, independent company. We are going to continue to stay based in San Francisco.
Colbert: You and Pets.com. [audience laughs. Stone looks annoyed.]
Stone: We are recognizing a difference right now between profit and value. We are building value right now.
Colbert: Wait. What’s the difference between profit and value?
Stone: Well right now we are building on value. That means extending the service worldwide, globally, so that more people have access to the real-time network. And not just on the internet. There are over 4 billion mobile phones and when we network them together it is very transformative especially when you realize it works over both texting and the web. As we grow that network it becomes more valuable; as we add features to it, as we make it more robust. When we get to a certain point where we feel we’ve gotten there, we’ll begin experimenting with revenue models. This is not unlike how Google approached their revenue.
Analysis part 3
This last exchange is where I think Stone goes right off the rails. His line about “value” and “revenue” is utter rubbish.
Extending the service – taking it global etc. — has nothing to do with value. That’s called “extending the service”. Value is not added with new features and capabilities. To quote Warren Buffet:
Price is what you pay. Value is what you get.
Value is delivered or derived, not added through code and new functionality. Newsflash Stone! Millions of people are getting value today out of Twitter. Even with the frequent appearances of the Fail Whale, people continue to use the service.
And what’s this about Twitter networking the world’s 4 billion mobile phones together and being “transformative”. That’s just more mumbo jumbo. I guess with 45 or 50 million users of Twitter today, that’s just not enough to figure out how to generate some revenue?
Finally, what’s with the line “When we get to a certain point that we feel we’ve gotten there…” Huh???? Biz, could you just be a little more specific? And, hey VCs who’ve invested MILLIONS into Twitter….is this what passes for intelligent business speak from the founder of one of your portfolio companies?
But the interview continues:
Colbert: How long out is that?
Stone: How long is what?
Colbert: Before you experiment with revenue.
Stone: We’re going to start experimenting this year. But we don’t have to hit a home run right away. We have patient investors. We have time to work it out. We’re going to be exploring and experimenting starting this year and we have time to figure out what the perfect revenue model is.
Analysis Part 4
Hold on a minute. Almost immediately after saying “When we get to a certain point that we feel we are there…“, Stone indicates that “this year” is when that certain point will be reached that they will feel they are there. Wow. So why didn’t he say that in the first place?
So in summary what is Twitter?
It’s a free service that solved a problem people didn’t know they had. They’ve raised tens of millions of dollars in VC money, and the company’s goal is to be a strong, profitable, independent software company based in San Francisco. They’re currently in a phase of value building but later this year they will start “exploring and experimenting” with revenue models, but there is no urgency to find great model because they have patient investors.
For those you reading this, I’d love to hear your thoughts. Personally, I find the whole interview rather amusing; and not in the typical Colbert way. Stone seems like a nice guy, but his comments in the interview truly leave me suspicious about Twitter ever generating sustainable revenue, and also leave me wondering, what he was smoking when he went on the show?
But maybe I’m wrong. What do you think?
Saeed