Why Twitter Matters

Can the fledgling microblogging service become a social media powerhouse to rival giants like Facebookor will it be gobbled up?

It's easy to laugh at nonsense on Twitter, the microblogging 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 bite-size 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 (HRB) 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 microblogging service could become a powerhouse in social media.

Popularity Brings Outages and Funding

Twitter has come a long way since its grand debut at the South by Southwest tech conference (BusinessWeek, 4/02/07) 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, including the all-important "to tweet."

But with Twitter's 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, the company has replaced key members of its tech staff, including lead architect, Blaine Cook..

To ramp up, San Francisco-based Twitter appears to be positioning itself for another round. A Cnet (CNET) report in April said the company is raising $15 million to $20 million. Twitter won't comment on funding, but Fred Wilson, a partner at Union Square Ventures, an investor in the first round, doesn't deny the rumors. "Where there's smoke, there's fire," he says.

What the Future Holds

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

Is Twitter a fad, a feature, or a growing giant?

How are businesses using Twitter?

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 furnishing facts and links to blog posts and articles. You can read many of them on Twitter search engine Summize by looking for #bwstory.

Social Habit

Much of the 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," tweets 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 occurred: 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-size 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. What's more, Twitter is weaving itself into larger networks. Most recently a link with News Corp.'s (NWS) MySpace will enable users to shuttle data between those sites, eBay (EBAY), and Yahoo! (YHOO).

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.

Promotional Tweets?

Businesses, of course, are more interested in what Twitterers are buying. Dataminers like Seattle's Visible Technologies are helping companies such as Hormel Foods (HRL) and Panasonic pore through millions of tweets, finding customers talking about their products. Dell (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. We sent a tweet. Seven had responded within an hour, led by H&R Block.

The Search for Viability

One of the last questions we asked: If you could invest in Twitter, would you? It's a key question. To get the funding it needs for its tech upgrade, and perhaps an eventual stock offering, Twitter needs to make a viable business case. If it falls short, Twitter is more likely to wind up as an application in a larger Web company, such as Google (GOOG). The company has launched an advertising program on its site in Japan, but it's "largely experimental," Stone says.

Twitterers, of course, have all sorts of ideas about how to monetize the system. Some suggest subscriptions, or perhaps using promotional tweets every once in a while tied to the words in 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 Twitter so prolifically now are still hooked on 140-character communications.

Check out the BusinessWeek.com slide show to learn more about the Twitter story.

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