Twitter Makes a Racket. But Revenues?

The social network is being coy about its intentions. Monetizing its search engine could end up being one

In Twitter, the masses on the Web have their newest darling child, something that's all delight and precociousness and pure potential. Or at least the masses of media and tech people on the Web feel that way. (That particular audience is why you hear so much about it. Twitter's millions of adopters are multiplying quickly, but according to comScore (SCOR), its U.S. users still lagged those of second-tier social network Bebo in February.) But amid the millions sending 140-character updates and scarfing up the same from those they "follow" on the service, some party-poopers dare to wonder how Twitter will make a buck for anyone: for itself, for the other businesses that Twitter or otherwise use it, and for those who—bad jargon alert—"tweet" updates and create the content that keeps users returning.

To date, Twitter's plans remain obscured behind a sort of Silicon Valley Mona Lisa smile. The company is playing well with others while divulging next to nothing about its intentions. It's allowing outside parties to create Web sites that manipulate and repackage its streams of tweets. One is CoTweet, a company whose platform organizes multiple Twitter exchanges with customers so they may be more easily tracked, and which has worked with Microsoft (MSFT) and Ford Motor (F). And Google is now selling an ad unit built around a company's last five Twitter updates, with the first customer being Intuit (INTU).

These things, and others, are happening with Twitter's consent and without it demanding a dime. This, and the attenuated and text-heavy nature of Twitter's service, coax the curmudgeonly into grumbling about its prospects. "Yet another example of a clever widget which has sort of a trendy element to it but has no economic significance, and no lasting significance," harrumphs one investment banker who's done deals for online properties.

But, really, if Twitter wants to ring up some revenue posthaste, all it has to do is throw up an ad unit on each page. (In a brief e-mail exchange, Twitter founder Biz Stone wrote that "finding a model that scales with our growth and adds relevance and value to users is much more interesting to us than traditional online advertising.") The more ambitious play has to do with Twitter's search engine, which it acquired last summer and which does an admirable job of capturing what is happening on the site on a moment-to-moment basis. Google can't do this. Twitter's recent talks with Google—and other big online players—centered around potential search partnerships, says someone familiar with the discussions. Combining Twitter's search engine with one of users' most common activities—sharing favored links—makes for something that has long been fantasized about: a real-time, human-powered search-cum-recommendation engine for content. (I'm pinching that last thought from media executive Dan McCarthy's blog, ViralHousingFix.)

That, though, still places Twitter a few steps away from actual revenue, and so it is for businesses that use it. If your business is purely transactional, great. You can use Twitter as an online couponing agent or to direct consumers to purchases. (Three places doing this well: Whole Foods (WFMI), Dell (DELL), and Web retailer Woot, which puts one discounted item on sale each day.) Besides that, other than obvious promotional, customer-outreach and -service efforts, Twitter is a nice thing to do and probably unavoidable, given its status in the ecosystem of online chatter. But as with a Facebook profile, it ain't gonna change your company's life.

Right now, Twitter, in keeping with the ways of the Web, has an appropriate plasticity and is still being defined by its audience. For users, it's enormously seductive. (It is certainly seducing me; find me at @jonfine.) But at this stage, Twitter is all about attention—attention as defined by followers. And today, unlike other measures of media attention, from TV ratings to Web traffic, attention on Twitter is almost wholly unmonetizable for virtually all its users. Currently, Twitter is an attention economy, because attention is its only currency. If you take the delight out of the experience and look through clear eyes, this darling child is indeed brimming with potential. But it also has lots of growing up to do.

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