Venture capitalist Fred Wilson, who is an investor in Twitter, argues that the value of Twitter is “all about links.” Today at the 140 Characters Conference in New York City, Wilson gave a presentation ostensibly about how to make money from Twitter. The value of Twitter, he says, is in “the power of the passed link.”
He compared Twitter’s recent organic growth to the early growth of Google (minus any mention of Twitter’s recent slowdown) and shared some analysis of traffic to the Websites of his portfolio companies and his blog. Google is the dominant source of traffic, but over the past 12 months Twitter [and Facebook] traffic has been growing 30 to 40 percent per month. It is becoming a significant source of traffic to those Websites, to the point where it is now bringing about 20 percent as much traffic as Google.
Wilson predicts that at current growth rates, Twitter [and Facebook] “will surpass Google [as a source of traffic] for many websites in the next year.” And that just as nearly every site on the Web has become addicted to Google juice, they will increasingly try to find ways to get more links from Twitter. Because Twitter equals traffic. (We’ve noticed a similar trend at TechCrunch, where Twitter is now our second largest outside source of traffic after Google).
Moreover, he asserts that these Twitter links “convert better” than search links because they are often pre-filtered and come in the form of a recommendation from someone you are following. And while spam is a growing issue, it is somewhat mitigated by the ability to unfollow anyone who abuses your trust.
Given these dynamics, Twitter needs to “inject a paid model” into its service, says Wilson. He is clear that he is not speaking on behalf of Twitter:
I am not telegraphing anything here. It is the obvious thing to do. If they don’t do it, someone will figure out how to do it as a third party application.
Twitter co-founder Jack Dorsey was sitting right next to me when Wilson said this onstage. He didn’t seem surprised by anything Wilson was saying. But how exactly is the best way to inject paid or sponsored links into Twitter?
Again, looking at Google might be instructive. Google delivers traffic to Websites through a combination of organic and paid links. The paid links amount to billions of dollars in revenues for Google, but they wouldn’t work without the links in natural results. Twitter needs to come up with unobtrusive ways to inject sponsored Tweets with paid links into people’s Twitter streams. It is still not clear, however, how it can do this without turning off users.
Update: Fred Wilson points out in comments that his observations were “about facebook and twitter together, not twitter specifically.” Fair enough, Twitter isn’t the only stream out there. Although, if his referrer logs look anything like ours, passed links on Twitter bring in five times as much traffic as passed links on Facebook. Maybe it is the exact opposite for him. So wherever you see Twitter above, insert “and Facebook.” But he was at a Twitter conference, after all, and passing links is more of a core activity on Twitter than it is on Facebook, which is why I focused on his comments as they applied to the former.
“The Power Of Passed Links”
While true its still a spin.
not spin at all…..but a bit like glowing about the power of email. or the phone. or IM. while truly awesome, tough to monetize.
why not split revenues with users? e.g. brands/links pay users to link to their sites on twitter and twitter takes 50% commission. Brands/websites would target those users who already link to them/sites like them frequently.
are you ok with calling your grandma and having her sit thru a 30 second commercial so you can split the ad dollars?
i figured not.
Most links are http: // blah blah. It were nice if it could include title of link page. Or a built in cool-iris?
@blindlink have you seen tweetlinx? it resolves links and generates a text preview w/ a thumbnail
It’s a last gasp as far as I’m concerned. The emperor has no clothes.
The “Power” also applies to digg or delicious or any other million services which does just that with much less spam.
Not a spin. It makes total sense to use the passed links as one of the parameters to determine the popularity of a webpage. In fact, I use the real-time search engine http://www.boilingpage.com that does exactly the same. You can clearly see the difference when you search for something in boilingpage and google.
Twitter’s power comes from its user base – they destroy that they are left with nothing. Paid / sponsored links makes sense from a monetization standpoint but that is about it.
@khawe — +1 to your comment!
Kieran , i agree with you .you are absolutely correct …!!
they’re totally going to buy bit.ly
I wouldn’t blame them. Fred’s talked about a “social media dashboard” in the past and bit.ly fits right into that equation.
Why would they buy bit.ly? They can destroy bit.ly buy creating their own service.
People seem to forget that twitter links are primarily used for discovery and rarely search.
I agree partially with SAM.
I guess that they would come up with comprehensive and better application or way to monetize their service
Why don’t they just buy Betaworks? They make all their acquisitions from them anyway. Buy in bulk – get a discount.
Mike, you are right.
Very true that Twitter is “all about links.” Put another way, one’s value on Twitter comes from giving “good URL” – a phrase I picked up at SXSW this year. Think about that before your next tweet.
Twitter has raised the term “microblogging” to an amazing level where every one wants to be a part of it. With its flexible api, one can do wonders !
Fred creates value wherever he goes. The power of search is social, but every competitor will be crossing lines in their offerings, so it is difficult to tell who the winner(s) may be. I believe that crowdsourced search will be one component of this. “The wisdom of crowds:.
With the ‘power of passed links’ including a large amount of shortened URLs, it’s pretty easy for spammers to forward around malicious URLs without their followers knowing. It’s important to be sure that you trust the source when clicking on the link, especially through searches.
Link spam is one area Twitter should really be focusing on – an easy way to kill positive press / growth!
Nice. Fred is working very hard to generate an exorbitant return for his investment.
No doubt Twitter has created a wave behind it but it also has most departing it after a couple of months, something like 60% stop using twitter after 30 days or so.
That is not Google, nowhere close to it. Google has defensible IP that is used to solve a huge problem in a good way. Twitter is something for somebody
That last paragraph makes no sense given the rest of the article. If trust comes from the people in your stream “injecting paid tweets” as you put it is surely destined to fail.
Twitter needs to work out how it can earn a commission from sales generated via person to person tweets.
For instance, I recommend an book on Amazon via Twitter. Twitter needs to be taking a cut of the revenue generated. It’s a pure CPA play, and there is companies already out there who can help do this.
What is the difference between a paid tweet and you recommending a book you know you will get money for if people click through and buy?
Come on, is it really that hard to monetize Twitter?
1. Offer a “featured users” section, where users pay for placement. This makes it easy for new (and old) Twitterers to find interesting people to follow.
2. Have a bunch of automated Tweeters for people to follow that post interesting links regularly (a few each day). These would be very topic-specific. Content providers would pay for placement in these. A set of semi-volunteers could manage the queue of links, voting up good ones and voting down bad ones. With some guidelines, this would be huge – useful and valuable for everyone.
3. Sell “featured” hashtags so that key conversations will be highlighted on the main page.
4. Offer paid Twitter services, like superior search tools and follower management. I can think of several services I’d be happy to pay a small monthly fee for.
5. Develop tools that summarize large conversations on specific topics and sell this service to large media operations. This could be done easily by calculating the number of retweets per follower of a comment on a specific topic. Twitter could simply sell such collections of key tweets to large media companies.
There are TONS of ways Twitter can make a lot of money without damaging the effectiveness of Twitter – in fact, most of these would make Twitter MORE useful.
1. This makes it easy for new (and old) Twitterers to find RICH people to follow.
i would not comment on the other ideas only one bad idea at a time.
Trent you make perfect sense. Fred always adds value but he knows perfectly well how they are going to monetize twitter. The statements this morning make no sense unless he’s running it up the flagpole for feedback.
Twitter is encouraging Applications to do this. IMHO Twitter should do monetization that is Automated, Self Serve, or “AdSense” like and continue to partner with companies to do Brand, Marketing, Media and Engagement as they require heavy cost of sales and take a long time to build.
1. Offer a “featured users” section: Twitter should do People Search API, and encourage more WeFollow.com, Tinker.com/users, etc
2. Have a bunch of automated Tweeters for people to follow that post interesting links: Sounds like the Tinker.com Model with Event & Topic curators: tinker.com/events/all and http://tinyurl.com/msn3ka
3. Sell “featured” hashtags: See http://tinyurl.com/ku46a4 also see Away We Go Movie Ad on http://www.twittermoms.com/
4. Offer paid Twitter services, like superior search tools and follower management.
Twitter needs a “Pro” account
5. Develop tools that summarize large conversations on specific topics and sell this service to large media operations.
Try: http://tinyurl.com/ncdpyw
twitter related traffic converts better because its authentic passed links (i.e. we know as consumers for the most part its not paid for)
This link was passed to me via Twitter. This trend is real and powerful. There’s a curation problem on the web and I rely on my network to help me discover what is worth my attention. Smart companies will explore ways to manage and monetize this trend.
Fred’s approach, when you think about it is (along with the management team) part of the business strategy. Just as you can’t separate PageRank from the Google founders.
What you do in a company eminates from who you are.
I am also now seeing this twitter is a good source of traffic and for me twitter brings more traffic than Google, Idea of selling links on twitter not seems bad.
Maybe you should change the name of the site from TechCrunch to TwitterCrunch?
Dude go away. Erick is covering a conference. Sick of uneducated comments like yours.
‘It is still not clear, however, how it can do this without turning off users’.
It’s unfortunate that the simplicity of the interface the service is applauded for might just be it’s downfall in the route to monetisation.
Twitter will face a big challenge when they try to inject sponsored links; relevance
If I search for ” Web hosting ” I will get a bunch of relevant, sponsored links.
AdSense also have a very important imput from the user, the user visit and reads a website that may like, AdSense give relevance by content
In both cases the user help google by giving an important imput, your only imput in twitter is following someone.H ow do you understand what a follower may like based only on the people he/she follows ?
Some products will be easier to sell via twitter but imagine a Dental Care ad in twitter Where will it be relevant ?
Demografic ads like facebook will not do either
Im exited to see how twitter solves this.
It’s funny to think that so many of us are addicted to Twitter when really, it’s such a basic service.
In the short-term, Twitter has a chance of turning traffic into money by partnering with Google, though it would be difficult to set a hierarchy of shared links (maybe by the number of followers the first person who tweeted has and the retweets afterwards?). I doubt there’s a future in paid service from Twitter.
very true
Passing links is one path to monetization but how about this – Gmail sells contextual ads adjacent to private conversations individuals are having.
With natural language tools and the right data mining tools, public conversations on micro-blogging platforms can be monetized in a similar fashion; i.e. someone on twitter states that they are “thinking about replacing the old truck” – if one can append the right metadata and has the right contextual intelligence, this is a real-time warm lead that could be sold.
“I am not telegraphing anything here. It is the obvious thing to do. If they don’t do it, someone will figure out how to do it as a third party application.”
Ummm, correct me if I’m wrong here, but hasn’t Tweetie for Mac been doing this for awhile now? Not only do I get paid advertisements inline with my Twitter feed, but they seem to be tailored to my interests and I’ve clicked on almost every one of them.
The beauty of Twitter is it’s flexibility and ease of use. I see a difficult time for Fred and that group because it’s almost like they’re trying to make money off a protocol.
If they start making it obtrusive, someone will simply make an open version of it that anyone can host (similar to email or torrents) – with others making collaborative sites to group all your feeds.
To make a prediction: eventually I can see Twitter style protocols running in parallel with email – a “simple” and quick form of pseudo-email. With many tools that mirror what we have now for email. And, just like email, no one owns the protocol (like gif vs/ png), but services make money by giving users an end point from where they send/receive tweets, can purchase spam filters, add-ons, etc…
Advertising isn’t the right model to monetize Twitter, because tinyurl can’t give branding URL
Guarantee that Twitter’s growth begins a decline soon. Early adopters have adapted, but they are unable to retain non-adopters.
Sharing links is valuable, but surpassing Google, is he high?
I disagree with the spam mitigation. Although you can simply unfollow someone much of the spam is still coming from people you have never met.
I have to say that I kind of disagree with the statement of the power being in passed links…
As someone who really only has time to catch up on Twitter on my iPhone while riding the train, I am rarely inclined to click on a link unless the tweet about it is really compelling or is written with an intriguing teaser. Which, as you know, gets harder as an item is RT’d multiple times, leaving less room for context or editorial color.
I may make up a small minority in saying that but I can get all the interesting links I want, when I want, by using any number of social bookmarking tools out there. I don’t really look to Twitter for that.
Excellent article… Everything Fred Wilson says is well thought… I love the way he sees innovation… Facts are: Yes I do use twitter for the quality of links posted by people I follow… This has rapidly replaced my numerous rss feeds… 2nd: I like the way a similar model to adsense or adwords could be integrated into the Twitter ecosystem…I just don’t know how annoying it would be and how relevant it would be…
nice write up @erickschonfeld i obviously agree with @fredwilson. first hand example of twitter overtaking google here http://bit.ly/AvGfQ
funny thing is, everyone’s gotta use url hacks (shorteners) to fit within the silly 140 char limit. seems if urls are what is so valuable they need to re-architect the entire service.