All that Twitters isn’t gold

The world may be buzzing about Twitter, but will the San Francisco- based messaging service with the high cool factor ever be a money maker? Or will it operate at a perpetual loss, as one Wall Street analyst suggested, "until the next cool Web 2.0 social networking concept comes along and Twitter tweets no more."

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Just three years old, the free service, which allows its users to send messages of up to 140 characters, is the Internet’s fastest growing social networking site, according to the research firm, Nielsen.

Unique visitors to Twitter’s Web site skyrocketed from 475,000 unique users in February 2008 to more than 7 million in February 2009. And those statistics don’t count people using the service on their mobile phones.

Twitter was founded in 2006 by Evan Williams, Biz Stone and Jack Dorsey. Williams is best known for creating Blogger, a blogging service, and later selling it to Google. Stone also worked for Google, and later he and Williams left to form a podcasting company called Odeo. Twitter was hatched as a side project inside Odeo by Dorsey.

Dorsey had been CEO of Twitter when it became an independent company in 2007, but a year later yielded the title to Williams, who had more experience running startups. Dorsey is now chairman of Twitter, which is backed with venture capital from Union Square Ventures, Digital Garage, Spark Capital and Bezos Expeditions, an investment group led by Jeff Bezos, CEO of Amazon.

Twitter’s messaging service is a blend of text messaging, blogging and random thoughts. Some observers have described Twitter’s service as a “micro-blogging” platform that is a real-time gauge of what its users are thinking, seeing or doing.

Some users have become citizen reporters during events such as the May 2008, earthquake in China, the November 2008 terrorist attacks in Mumbai, India, and the January plunge of a US Airways jet in the Hudson River outside Manhattan. In fact, Twitter reports, also known as tweets, from people on the scene are often the first accounts available, as was the case with Janis Krums, a Sarasota, N.Y.

resident, who twittered to friends: “There’s a plane in the Hudson.

I’m on the ferry going to pick up the people. Crazy.” Krums also uploaded the photo of the plane just after it hit the water.

Those events have given Twitter an invaluable buzz boost, says Shawndra Hill, an operations and information management professor at Wharton. “The primary reason Twitter has taken off is that celebrities and businesses are using it. Consumers want to feel like they are in touch with celebrities. Businesses want to be in touch with customers.

And it certainly doesn’t hurt that CNN says “follow us on Twitter.'”

Predicting Twitter’s business prospects has become a bit of a virtual parlor game in Silicon Valley as observers guess how the service might ultimately turn a profit. Twitter CEO Evan Williams has been coy about the company’s revenue plans. In December 2008, Williams said, Twitter “will make money. I can’t say exactly how because we can’t predict how the businesses we’re in will work.” On the company’s site, Twitter adds that the company “has many appealing opportunities for generating revenue, but we are holding off” to focus on building its service and growing the user base.

Author: Knowledge@Wharton