What is the business logic driving free web services such as Twitter?

[Andy Tips]

Hi,

Usually the thinking behind this type of business is that the initial phase of their business is to attract a massive user base by offering their service for free.

Once they have a substantial user base, that's a valuable asset that they'll look to monetize.

In the case of Twitter, they've spent the time so far building their brand and increasing the user base so that they can then move over to a monetization model.

Recently there have been suggestions that Twitter will start charging companies for new functions designed to put them in more effective touch with their customers.

Here's what one of the Twitter guys said:

"However, it’s important to note that whatever we come up with, Twitter will remain free to use by everyone—individuals, companies, celebrities, etc. What we’re thinking about is adding value in places where we are already seeing traction, not imposing fees on existing services. We are still very early in the idea stage and we don’t have anything to share just yet despite a recent surge in speculation. When we do, we’ll be sure to let you know."

So, it looks like they won't charge for the existing features, but will add others that are monetized as they see opportunities.

I use Twitter and make a decent income from it as it is, so I'm sure they're going to be around for a while and make some good money from it. They've had $55million in funding so their plans are likely to be big as far as getting that back and returning a profit.

Andy
http://www.turntoandy.com/blog/