The Twitter Story I've been working on

Do businesses (and the rest of us) need Twitter? Is it around for the long haul. Dozens of Twitterers added to the reporting.

Here it is. Got held up a bit because BW Online wanted to run an edited version. This is what I sent Tuesday night. Please suggest fixes and adds.

It’s easy to laugh at nonsense on Twitter, the micro-blogging rage. “my nose is leaking,” writes someone called Zapples. “so imma go to sleep now…” But I’ve heard lots of similar drivel (and even produced some myself) on the phone—an important technology if there ever was one. The key question today isn’t what’s dumb on Twitter, but instead how a service with chicklet-sized messages topping out at 140 characters can be smart, useful, maybe even necessary.

Here's why I'm looking. In the last few months, the traffic on Twitter has exploded, growing far beyond its circles of bleeding-edge tech enthusiasts and hard-core social networkers. Businesses such as H&R Block and Zappos are now using Twitter to respond to customer queries. Market researchers look to it to scope out minute-by-minute trends. Media groups are focusing on Twitterers as first-to-the-scene reporters. (They were on top of the May 12 China earthquake within minutes.) Loads of new applications and services are growing around the Twitter platform, leading some to suggest that the micro-blogging service could become a powerhouse in social media.

Twitter has come a long way since its grand debut at at the South by Southwest tech conference only 14 months ago. It quickly landed $5.4 million in venture funding. New crowds learned to communicate in haiku-length blog posts, even throwing in Web links with abbreviated addresses. They developed new vocabulary, with new verbs popping up, including the all-important "To Tweet." But with its soaring popularity comes one big problem: All too frequent outages in a service that seems to be outgrowing its own technology. In the last month, Twitter has replaced top tech hands, including lead architect Blaine Cook . (UPDATE: Cook says on Thursday that he left for personal reasons, unconnected to the scaling issues.)

To ramp up, the San Francisco-based Twitter appears to be positioning for another round. The company won't comment on funding, but Fred Wilson, partner of Union Square Ventures, an investor in the first round, doesn't deny the rumors. "Where there's smoke, there's fire," he says.

So, I set out to delve into Twitter. And on May 8 and 9 I looked to Twitter's own community for help, asking the following questions:

1) Is Twitter a fad, a feature, or a growing giant? 2) How are businesses using it? 3) What is Twitter worth? A fourth question, implicit in the whole exercise: Should we all be Twittering?

Responses poured in, more than 250 of them, some pure opinion, others furnished with facts and links to blog posts and articles. You can read many of them on Twitter search engine Summize by looking for #bwstory.

Naturally, much of Twittering crowd argues that Twitter will continue to grow in importance, perhaps rivaling other social media powers such as Facebook. "I have hundreds of friends on FB, but have done 10x the networking, connecting & communicating on Twitter," writes Christian Anderson. Biz Stone, a Twitter co-founder, tells me on the phone that the plan is for Twitter to grow by a factor of 10, or even 100. "It can become a communication utility," he says, "something people use every day."

How could tiny Twitter ever become such a titan? It's not the core technology, which is simple, but instead the community. Twitterers find and follow the people they care about on the service. Late in April, following one of Twitter's outages, TechCrunch's Michael Arrington wrote: I realized that in the last two months a subtle shift occured: I now need Twitter more than Twitter needs me. Arrington, who has nearly 17,000 people following his Twitterstream, continued. "It is now an important part of my work and social life, as I carry on bite-sized conversations with thousands of people around the world throughout the day. It’s a huge marketing tool, and information tool. But it is also a social habit that’s hard to kick."

It may seem to Arrington that everyone he cares about is Twittering. But despite impressive growth, Twitter's universe is small. Estimates for the Twittering masses range between half a million and one million active users. Even if this undercounts the number of those who post their tweets through cell phones or other sites, Twitter is still pint-sized compared to Facebook, with its 70 million users. And even on Twitter, plenty of people predict that the crowd will abandon the service en masse when something more alluring turns up. "Too flakey, both technology wise and audience - too fickle," tweets one.

Still, there are a few reasons why Twitter might endure. First, it's simple and easy to use--and if the crowd you care about migrates to Twitter, it makes sense to follow. What's more, Twitter is weaving itself into larger networks. Most recently a link with MySpace will enable users to shuttle data between those sites, eBay and Yahoo. Also, like Facebook, Twitter has a large and vigorous developer community. "It's already a platform, a classic textbook definition," tweets Jonathan Yarmis of AMR Research. David Troy, for example, founder of Roundhouse Technologies in Baltimore, recently launched a geography application called Twittervision, where you can click on a country--say China--and see the tweets as they appear. "We have more local stuff coming," he says. Another application, called Twistori, shows a stream of Twitters showing what people are wishing, feeling, thinking.

Businesses, of course, are more interested in what they're buying. Dataminers like Seattle's Visible Technologies are helping companies such as Hormel and Panasonic pour through millions of Tweets, finding customers talking about their products. Dell, a Visible customer, scouts out the Tweets and dispatches its Twittering workers to jump into the conversations. At a conference last week, the company claimed to have boosted sales through these efforts by $500,000 in recent months.

Lots of other companies are starting to use Twitter for quick customer service. To see whether they were really on the line, we held a race on Thursday. We sent a Tweet to nine companies. Seven had responded within an hour, led by HRBlock.

One of the last questions we asked: If you could invest in Twitter, would you? It's a key question. To get funding it needs for its tech upgrade, and perhaps for an eventual stock offering, Twitter needs to make a viable business case. If it falls short, it's more likely to wind up as a application in a larger Web company.

For now, because the business model is still undefined. In April, the company launched advertising on its new site in Japan. They're static ads for Toyota and Japanese publisher that sit on the righthand side of the Web page. "It's largely experimental," says Stone.

Twitterers, of course, have all sorts of ideas about how to monetize the system. Some suggest subscriptions, or perhaps promotional tweets every once in a while tied to the words in each user's tweets. Stone avoids details. The goal now, he says, is to raise money, nail down the technology and grow Twitter until it's enormous. Money comes later. But he and the others know that if they wait too long, Twitter risks disappearing into the belly of a competitor or succumbing to copycats. And that's provided that those of us who Tweet so prolifically now are still hooked on 140-character communications.

Before it's here, it's on the Bloomberg Terminal.