Editor’s note: The guest post below was written by Brian Lawe, CEO and Founder of MyStoreCredit. Brian’s company develops e-commerce tools around payments, cross-promotion and customer mapping. He’s been watching Twitter for some time.
The rumors are ripe that Apple, Microsoft, Google and News Corp are all sniffing around Twitter – but no one has mentioned the best fit: Amazon. If Amazon doesn’t jump into the arena, someone at Twitter ought to make a call to Jeff Bezos. Neither Amazon nor Twitter should miss the powerful synergies from merging the two companies. To wit:
- Introducing Twitter Payments: Amazon has been struggling to gain traction with its payments platform. They will never unseat or even threaten PayPal until they come up with a unique and differentiated strategy. The world does not need yet another payment option. But Twitter is something new and does offer a smart strategy. By rewarding Twitter users for associating their Twitter accounts with their Amazon account, Amazon can instantly create a new, potentially dominating powerhouse in payments for mobile and online transactions.
- Using Twitter as the base, builds on PayPal’s model of making payments easy by letting users pay just by entering their Twitter ID – which would be the same as their Amazon Payments ID. If Amazon Payments can seize this deal and execute a launch of “Twitter Payments,” the net result could make Amazon/Twitter Payments a real threat to PayPal and a real payments choice for users.
- One of the least-understood benefits of tightly tying PayPal to eBay transactions is the resulting free promotion PayPal gets being front-and-center in all eBay transactions. Visa or Mastercard would have to pay millions and millions to get that kind of preferred-positioning in a transaction. By linking Amazon Payments to Twitter accounts – Amazon could get the same preferred position for ALL mobile payments – all at no cost. Smart money puts PayPal’s current valuation at $8-12 billion. Not a bad return if Amazon bought Twitter for $700 million.
- PS: While Google has a payments platform – it is structurally different from Amazon Payments and it would not benefit from the same synergies with Twitter. Google’s payment service is more like a credit card consolidation service vs. a true payments platform.
- Amazon’s recommendation engine is suited for 140 characters: Twitter has an albatross: No obvious business model has emerged for Twitter and none seems evident to justify a $100 million (let alone $700 million) valuation. Google has taught the world that over-paying for a hot media property (Youtube) solely based on “users” is a dumb move. Hulu took some time in coming on, but it proves the case that any hot new media isn’t immune to competition forever. Which means Twitter will have to offer a sustainable business model to pay-back its buyer. Which brings us to Amazon’s unique ability to capitalize on Twitter’s highly restricted media medium.
- What could any advertiser possibly do with a service that constrains itself to only 140 characters? Unless you are a copy-writer, you can’t comprehend how difficult it is to promote something in just 140 characters!
- Enter Amazon’s recommendation engine. Tweet “Amazon’s recommendations 4 u:” and you still have 111 characters to describe a book, movie, song, toy or any other item sold on Amazon. The 140 characters alone are highly constraining. In this case, the medium is most definitely not the message. The message has to be the message. And the message has to be extremely targeted.
- You can’t target a 140 character message unless you know a whole hell of a lot about the recipient. Amazon alone is the best player to use its database of shopping history to create highly targeted 140 character messages to Twitter users. Imagine if Amazon offered a $5.00 coupon to any Amazon buyer who registers their Twitter account on Amazon? Once the two are linked—game over.
- My thinking assumes ultimately someone will have to pay the piper for the “free” twitter service and twitter-approved ads make the best sense. If that is ultimately true and an ad-driven model emerges, then the restriction of the 140 characters is a huge constraint which can only be overcome with highly-effective cross-merchandising (which only Amazon does effectively at scale).
- Among the current named suitors, only Apple is also similarly situated to utilize the character limitation to highly cross-promote. But what can it cross-promote? Songs? An average song is only $0.99. Compare this low price item to Amazon’s ability to promote any product at any time. Amazon can use the same 140 characters to promote $5, $50 or $500 items. Think of it this way: If Apple was equally successful at cross-promoting a $0.99 song as Amazon might be at cross-promoting a child’s toy for $50 – the profit value Amazon would capture in the same promotion and for the same tweet would be 10-50x better than what Apple could capture.
- Amazon could best control the brand marketing experience: Twitter users are not going to sit by passively letting a new owner test formats forever. If they feel spammed, they’ll turn and run from Twitter. There is risk that any new owner could destroy the Twitter brand by over-testing or probing for a promotion model to make a Twitter acquisition pay off. But Amazon has a core-strength in doing this. Amazon is renowned for its ability to test creative and GUI’s and measuring sales results. Top that off with Amazon’s “one-click” to buy patent — and you just made mobile buying as easy and comfortable as apple pie.
- Amazon needs to take some risks. Amazon’s recent results relative to its arch-rival eBay are impressive. One lesson Amazon can take from eBay’s missteps is the need to invest in new ideas before your existing model begins to gentrify. Clearly, mobile and social are two huge areas where Amazon should be looking to play. Twitter gets them into both games. Amazon does run the risk, as eBay did with Skype, of choosing the wrong horse to ride. But given the threat of losing Twitter to other players who will then control promotion and marketing access to mobile users, this is one bet Amazon ought to take today.
Twitter needs a revenue model. Like democracy, the one I propose is the worst—except for all others. I wish the Twitter folks all the best in their decisions in the days ahead. But if Amazon doesn’t step-up to the plate now—and with a very big bat—they will have missed one hell of an opportunity.