Twitter Boasts... And is somehow worth $1Billion?

The latest factoids from Twitter staff:

1. The average Twitter user has 126 followers;
2. 20% of its traffic comes through the Twitter website;
3. it doesn't make any money.

Near as I can tell, this is the greatest business plan in history. They overstate follower numbers (#1), they over-imply the promise of advertising value (#2), and they can't come up with a business plan to produce a revenue stream(#3).

All that adds up to a valuation, by an outside source, of $1 Billion. Anyone here remember the dot-com bust of 2000?

Breaking down the boast

I'll break this down one at a time.

#1 - Over-stated followers

A few spin doctors on the Twitter staff have released numbers to us stating that the average Twitter user has 126 followers. How many followers do you have?

Chances are the number is close to 6.

According to this fantastic little study, the top 10% of Twitter users have so many followers as to render the rest of us useless. The top 0.1% of Twitter users has some 18,000 followers. The top 10% has over 450.

Do the math - 0.1% of 54.7 million users (in August 2009) gives us 54,700 users with over 18,000 followers. I'm going to go out on a limb and say that these people are skewing the numbers.

After all, in order to get into this study, you must be deemed an "Active" user. The mind-boggling criteria to be deemed "Active" you might ask?

..."users with at least five followers, five friends, or five updates."

#2 - Over-Stated Advertising Potential

If 20% of traffic is going through the website, then 80% is not. That means 80% of all the traffic runs through a non-advertising portal such as a smart phone.

How long do you think it will take for the 20% to shrink to 0% once advertising pros start gumming up the Twitter website with banner ads?

Haven't you ever stopped to think why there aren't any ads on that site yet? Please...

#3 - It doesn't make any money

They don't make any money. This simple truth is why we know that Twitter has been valued at $1B. It's because they are running out of venture capital. Because they don't make any money.

Twitter is great

Please don't misinterpret my ramblings to say that Twitter isn't a fantastic social media tool. It is. In fact, it's the meaning of life for many a Twitter user and that must be worth something.

But let's not get carried away here...

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I have to be on Twitter ... don't I?

From @mitchjoel
Bad:What should we do on twitter?
Good:Why should we be on twitter?

I think this sums up the Twitter conversation going on in many businesses. Twitter is all over the news, in many circles of conversation, and people want to know how they can use it to improve their businesses.

The question I hear most from people is What should they do, but as @mitchjoel states, it's not what, but why. Are you going to be able to use Twitter to actually enhance your product? Improve customer service? Engage in conversation? Or is your only purpose to one way market?

My personal opinion is people first think of Twitter as an easy one way marketing tool like a billboard or newspaper ad. This is a failure of using Twitter to its full potential.

By figuring out the why, before the what, the chances you'll turn Twitter into a useful tool to enhance your business success will increase.

Plus, you might find out you don't need to be on Twitter and save yourself the effort of figuring out what to do.

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SEO and Social Media Don't Mix

Given the immense growth of social media sites over the past six years and the importance of link building in search engine marketing, it's not surprising that one common and flawed question continues to come up every few months: "How much of an effect do social media sites have in determining our website's visibility and PageRank?"

The simplest answer is: little to none. Generally speaking the largest social networking and social bookmarking sites provide very little utility when it comes to link building. While many sites such as MySpace, Facebook, Del.icio.us, YouTube and even Flickr once allowed unfettered direct linking, nowadays many social media sites have been obfuscating off-site links with page forwards, frames, and the more common "nofollow" anchor tag restriction. These small changes have essentially nullified any previous and current efforts to improve a site's Google PageRank via social networks.

Naturally, from an SEO perspective, this brings us back to square one. If it isn't possible to effectively utilize social media to increase your website's visibility, then what inherent value does it even have?

One of the best approaches is to think of your social media pages as being micro-sites for your preexisting base of customers; they can serve as convenient locations where you can provide former and current customers with content that's fresh, interesting, and immediate. Whereas you would normally apply a long-term strategy of attracting new customers to your company's website in the form of competitive SEO, a Facebook page is the perfect place to connect with current customers in order to create short-term conversion opportunities in the form of product announcements, discounts, and important company news.

That's just one example, of course. But it is one of the many opportunities that social media can provide your company if you approach it as a unique, social tool and not simply as a means for improving your PageRank.

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Social Media and Facebook

Facebook recently announced topping the 200 million users mark, surpassing many of the big traffic giants on the Internet. Google, Yahoo and MSN still claim more users but none of them have the staying power of social media.

What does it mean?

In a few short words: You probably already know what it means. That's the whole idea of social media.

The allure of Facebook, Twitter and Myspace is that they intended to mean something different for every user. Members upload photos; post links to their favorite websites; and update their own daily (or hourly) status.

Why do we care?

Facebook, Twitter and Myspace are all .COM sites. That is to say that they are all commercial ventures in search of a profit. They appear to be doing a good job on their part - now how do we monetize the situation without - and here's the kicker - without becoming a hindrance to the social media process.

There is obviously a great deal of traffic through these websites and where there's traffic, there's marketing potential. However, we're talking about social conversations (ostensibly) and interrupting that conversation with a negative distraction is tantamount to the pop-up ads of old.

How do we do it?

This post is the tip of the iceberg of conversations to come. We have a few, quick ideas for you to get started and we will circle back to this conversation over the next few months.

1. Start your own profile and take a look around at the ads around the site. If it annoys you, it will annoy others.


2. Search for your favorite brands, stores, and activities. Do they have a "Fan's Page"?


3. Look at your friend's profiles. Are they pointing to favorite pages? Are they linking to product postings, notes, events, or videos?


4. Are your friend's talking about the same?

Inserting yourself into these areas is tantamount to the old-fashioned way of direct marketing. Handing people a print ad on the street, as it were.

Instead of yelling into the wind, you and your company need to start listening to the voices. Interacting with the group.

It's a brave new world out there and your old Marketing Manual doesn't work in this space.

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