Twitter strategy› Just a starting point› Case study for internet startup strategy

Other interests› How screwed is Detroit and the US auto

industry?› What mobile platform or strategy will

win?› When and how will renewable energy be

sustainable?2

Considering the results of a quick strategic analysis, what should Twitter do

today to emerge as the “winner” in microblogging two years from now?

WINNER=

most usersand

greatest profits

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Partner with Facebook for deep integration of enhanced Twitter application

Why?› Mutually beneficial relationship

For Twitter: Access to existing ad platform, access to Fb’s huge user base, raised awareness, and further viral Twitter adoption

For Facebook: Satisfy user needs for microblogging social network features› Risk of inaction:

FB is not likely to sit out on the microblogging party It could roll its own Twitter clone by enhancing the Status Updates feature If this offering successfully leverage Fb’s network effects, it could pre-

empt Twitter’s adoption by mainstream FB users How?

› Features such as Two-way updates (from Fb to Twitter and vice versa) Commenting/@replies shared between Fb and Twitter Twitter integration with Fb groups (e.g. using unique @groupnames)

› Fb shares ad revenues with Twitter based on the volume of Tweets viewed in status feeds on Fb.com

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Create Twitter Enterprise service for internal usage by companies for collaboration

Why?› Prevent “Microsoft effect” from boosting other

microblogging players (e.g. Yammer) Software used all day at work is convenient to

use at home because I already know how (a la MS Office)

› Businesses will pay for value-added that consumers won’t, allowing Twitter to charge for the service

How?› Allow for employees to start using enterprise Twitter at

their company – without approval of IT managers – and build proof-is-in-the-pudding case studies

› Enable easy integration of enterprise Twitter with existing business systems

› Partner with universities to study benefits of microblogging for business productivity, profitability, employee loyalty, etc 6

Add group functionality to Twitter Why?

› Enterprise Twitter will need groups, anyway› Some customers want the feature today and might

turn to a competitor to find it Provides more benefit than cost

(new/retained users vs lost/deterred users)› Groups will enhance the role of Twitter in organizing

and sharing amongst informal social networks How?

› See Japan

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Reduce competitive risk by increasing brand recognition and loyalty

Why?› Brand loyalty strengthens network effects and

diminishes risk of substitution for competitors› It will be much easier to keep an existing customer

with Twitter than to convince someone to switch from another network they’re already using

How?› Work with media companies to promote the

use of Twitter E.g. CNN, CurrentTV on television

› This use of Twitter by business is already occurring organically – let’s make it even stronger by actively supporting it

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The following slides contain› Notes› Basic strategic analysis

5 Forces Analysis Scenario planning

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Commercial accounts› Premium services for businesses using Twitter to communicate with

customers› Provide analysis and tracking services to provide business information

Freemium› Free base level service, paid premium service

Premium API and branded clients› Pay for access to API over certain volume of requests or for commercial

purposes› Twitter-branded clients on “closed” platforms like most mobile phones

Share fee or subscription revenue with mobile provider Advertising

› Intermittent in-line tweet-ads in timeline or to SMS Enterprise version

› Corporate Twitter with admin controls and pay-per-user fees› Archiving, permissions, security, confidentiality, integration

Partner with (or sell to) Facebook› Integrate Twitter with News Feed› Share revenues from News Feed advertising

Others?

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Why is scenario planning a valuable tool for strategy planning at Twitter?

Uncertainty is high relative to executives’ ability to predict the future of the business

There are diverse, merit-worthy opinions regarding future strategy

The industry is incurring change at a significant rate

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Scope› Product and market: Twitter and the microblogging market› Timeframe: next two years

Stakeholders› Twitter, customers, suppliers, distributors, competitors

Trends› Continued growth of mobile as customers’ platform-of-

choice› Increasing use of microblogging by businesses to interact

with customers› Facebook and MySpace continue to expand user base› Increasing efforts by businesses to deploy online

collaboration tools to their employees› A vast majority of microblogging consumption continues

to occur through third-party clients› What else?

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Key uncertainties› Will existing social networks add microblogging

features?› Will an open source/standard microblogging format

emerge?› Will businesses embrace microblogging as an

enterprise tool on a wide scale?› Is advertising an effective method for monetizing

microblogging?› Will consumer customers pay for microblogging

services?› What portion of the population will adopt

microblogging actively?› How much will microblogging products change

before they become mainstream and stable?› Others?

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Slap in the Facebook World Facebook continues to build mass as the

hub of social networking X) Facebook transforms its Status Update

feature into a Twitter replacement› Twitter adoption is co-opted by Facebook’s entry into the market

-OR- Y) Twitter builds Fb app with newfound

integration or Facebook acquires Twitter14

Twitter in the Cloud Behind the Curtain Revenue through paid access to premium

API Distributors (mashups and social

networks) do the consumer monetization (like ads)

Twitter runs a B2B/B2C hybrid business model Twitter is deployed extensively across networks and

platforms via its API Hundreds or thousands of Twitter mashups are created Facebook/MySpace + Twitter integration via application

platforms Competitors will work to make microblogging open

and cheaper/free15

Microblogging the Microsoft Way Corporate adoption of a given

company’s microblogging tool drives consumer usage of that same product due to shared functionality and brand recognition (a la MS Office)

The microblogging system with the largest corporate user base wins the consumer game

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Open Sesame Open standards and open source software

for microblogging grow to lead the market› E.g. OpenMicroBlogging/Laconica

Network with large user base adopts standard and runs servers› Google, Yahoo, Facebook, MySpace, Microsoft

Adopters cut out Twitter as the “middle man” and use microblogging to drive traffic to their existing properties

Microblogging is not a stand alone business› See instant messaging

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Provides a systematic analysis of market structure and competition around a given market segment, company, or industry

Limitations› Assumes relatively static market

structure› Does not predict changes in dynamic

markets Scenario planning is useful in preparing

for unpredictable future situations 18

Barriers to entry and economies of scale are low due to low fixed costs› Competitors can be built with relatively little investment› Most costs are variable (bandwith and storage)

Substitutes› Facebook status updates, group SMS, IM, blogs, mobile social networks (Loopt)

Brand loyalty still building› Building brand equity via mainstream media mentions such as CNN

Little to no intellectual property required Distribution over the Internet is open to any competitor Twitter does carry some weight in distribution on platforms by way of

being the market leader› If only one microblogging tool is integrated, it will be Twitter

Switching costs vary amongst users and between consumer and enterprise markets› It remains to be seen how much customers value their archived Tweets compared

to emails and blog posts Currently microblogging tools are free to consumers, so no product has a

price advantage The product is early in its lifecycle so it will be evolving rapidly in the near

future› This increases the likelihood that one company can leapfrog another

Network effect is single greatest strength of Twitter19

Increase minimum efficient/effective scale› E.g. leverage network effects to increase

hurdle for competitor newcomers Increase brand awareness to strengthen loyalty

› E.g. partnerships with major media companies Patent important innovations in infrastructure Create alliances with linked products/services and

suppliers/distributors› E.g. partner with Facebook, mobile networks

Increase switching costs for customers› E.g. emphasize value of archived conversation

Provide unique functionality not provided by substitute products› E.g. searchability of and mashups with timeline

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Suppliers and distributors of Twitter are usually one and the same. A supplier to Twitter provides users for the service. A distributor spreads messages from Twitter to users.

Examples› FriendFeed› Clients (Twhirl, TweetDeck, etc)› Facebook, if Twitter were integrated

Facebook has bargaining power as they control a huge base of users interested in social networking

Facebook can integrate forward and build its own Twitter competitor (i.e. modify Status Updates)› Low barrier to entry to do this today› Twitter’s user base is only a fraction of

Facebook’s

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Acquire the supplier/distributor Increase the supplier/distributor’s

dependence on Twitter› Then start charging them

Form exclusive partnerships with supplier/distributors

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Switching to an alternative product is relatively simple and does not induce high costs (for consumers)

Consumer customers are price-sensitive because the service is not essential for doing business (aka life)

Business customers are price-sensitive because microblogging:› Has not yet proven to increase profitability› Is not yet of great strategic importance

Twitter is the only choice for customers who want immediate access to a large network of other users

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Partner with competitors or suppliers/distributors› E.g. distribution through mobile company

like Verizon Get-It-Now› Reduces customer choices available

Increase loyalty of customers Increase incentives and value-added for

customers› i.e. make the product more useful

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Current microblogging platforms are not highly differentiated by capabilities› However, Twitter has the largest base of API partners with clients, analysis tools, etc

25

Acquire competitors› Not likely

Differentiate with unique features› Does any firm have a competitive

advantage in developing new features? Differentiate by continuing to grow

user network and lead by network effect

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Built-in short-link creation and analysis› Shortened Twitter URL automatically

created the first time a given full URL is Twittered Afterwards, the same shortened link is

used for the same full URL Allows for simple analysis of linking trends Could create Digg-like popularity ranking

› Short link sent to mobile but normal URL displayed on web/desktop

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