Sachin Rekhi

Silicon Alley Insider recently announced The Create a Twitter Revenue Model contest. I decided to throw together an entry and today SAI has picked it as one of the finalists. So I thought I would write a blog post summarizing my submission.

Thinking about business models for Twitter is always a fun exercise. I see Twitter as the epitome of web 2.0 - a sticky communication app with few differentiated user segments, minimal expressed interest, and no purchase intent. I always joke that if you can successfully monetize Twitter, then you can monetize anything :)

There are many different ways to think about monetizing Twitter. The ones that have been frequently discussed include a freemium subscription plan for power users or commercial users, inserting sponsored ads as tweets, or other forms of advertising. While these may eventually be successful strategies for Twitter, I decided to take a different approach.

Obviously today Twitter is not monetizing and therefore has no revenue. Yet the interesting thing is the Twitter ecosystem is definitely monetizing. We have desktop clients like Twitterriffic ($14.95) and Blogo ($25). We have a variety of iPhone clients available, including Tweetie ($2.99), Summizer ($2.99), Twittelator Pro ($4.99), and Tweetsville ($3.99). In addition, there are several companies already inserting ads as Tweets, including Twittad and Be-a-Magpie. The ecosystem has already seen StockTwits and TweetDeck raise funding and two acquisitions with Summize and Twhirl.

My approach to revenue then is for Twitter to monetize the channel that is already generating revenue for the ecosystem by monetizing the Twitter API that all these applications are built on top of. By introducing a premium Twitter Developer Program, Twitter can start to share in and encourage the profits that third party developers are making on top of the Twitter platform.

There have already been a variety of successfully monetized APIs, including:

Microsoft Parter Program & Certified for Windows
Microsoft has always had a long tradition of providing a partner program offering to developers who build on their various platforms. These programs provide developer tools, marketing support, and access to premium support. In addition, the Certified for Windows program charges every app for this badge that ensures customer trust.

PayPal Developer Central
PayPal's API for third party publishers to accept transactons and payments monetizes every transaction by taking a variable percentage.

iPhone Developer Program
Apple requires all developers that want to publish to the App Store to join the iPhone Developer Program. At $99-$299 per developer with over 15K applications, that's a several million dollar opportunity.

Facebook Platform's Application Verification Program
Facebook Platform’s Application Verification Program provides developers with a badge to encourage user trust of the app, increased distribution allocations for all viral channels, and an advertising credit. At $375/app/yr and over 48K apps, that’s tens of millions in annual revenue.

What would a Twitter Developer Program look like? Here are the suggested program benefits:

Benefit	Details
Commercial Use	Only applications that have registered for the developer program will be allowed to use the Twitter API for commercial use (ex: charging for your app, advertising in your app). Non-commercial use will always be free.
Twitter App Directory	As part of launching this program, Twitter will launch a full app directory that allows any app developer to add their Twitter mashup for easy app discovery by twitter users. Developer’s who are part of the developer program will be eligible to apply for the certified app program to get a badge to increase trust with users and will also receive premium placement in the app directory.
Increased Rate Limits	Developer program participants will have increased client rate limits (currently 100 requests/hr) and developer rate limits (currently 20,000 requests/hr) to improve user and developer experience.
Technical Support	Program participants will have priority access to developer technical support to support their application development.
Access to Firehose API	A premium developer program will be offered for those key partners that need access to the proverbial “firehose” that gives them access to all non-protected tweets. (This would only be available as part of a higher priced Twitter Developer Program, not in the standard plan).

One thing to be careful of in charging for access to a platform is to ensure that doing so does not stem innovation on the platform. That's why access to the Twitter API should always be available for free for anyone to tinker. This program simply provides value add for those building commercial businesses on top of the platform.

For more details on proposed pricing, size of opportunity, and FAQ, check out the full presentation embedded below: