Is There Any Value in Twitter-Based Applications?

By every definition (except revenue), Twitter was a major success in 2008. It grew from under 500,000 unique visits to nearly 2.5 million in November. Despite major stability problems and the infamous fail whale, Twitter has prospered and spurred its own mini-economy: Twitter applications.

Twitter applications are the websites and programs that use the Twiter API to do anything from collect data to creating a desktop interface for tweeting. Most are small and simple applications, and nearly all of them are free to use. Now there are literally thousands of applications for Twitter, and if you’re a frequent twitter user, you’re probably using at least several.

But what’s the value of these apps to their creators? Users have gained from being able to share twipics or making venn diagrams, but are Twitter applications a reasonable way to achieve a financial payday?

To answer that question isn’t sufficient. In order to get the full picture, we need to answer three related questions:

  • 1) Can you make money off of Twitter applications?
  • 2) Do you have a reasonable chance of making a payday off of Twitter applications?
  • 3) Can Twitter applications be built into successful business models with a positive cashflow?

Q: Can you actually make money off of Twitter applications?

Answer: Absolutely.

Summize (now Twitter Search) has been the largest success story of the twitter applications – its simple and effective Twitter search (and its very capable leader Jack Dorsey) made it a prime target for acquisition by Twitter itself. Silicon Alley Insider reported that Twitter paid $15 million to acquire summize. Not bad a for a small team and less than a year’s worth of work, no?

But beyond Summize and Twhirl being acquired, there have not been many major paydays for Twitter apps. The bad economy only restricts cash that could be used to acquire these apps as well.

But yes, there is the possibility of making money developing an application for Twitter.

Q: Does a developer(s) have a reasonable chance of making money off of Twitter applications?

Answer: No, not currently.

Here’s how I start: Do you have a reasonable chance of making moeny off of a Facebook application? The answer is murky, even despite for Facebook’s 120+ million users. The heyday of Facebook applications has passed, and users have adopted application-blind behaviors that hurts the Facebook platform as a financial landing pad. Free apps generally make money through advertising, which had abysmal CPM rates (I know; I made Facebook apps for a short time). Paid apps simply don’t exist on Facebook – there is no micropayment platform and most people on Facebook don’t have the mindset or habit of paying for applications.

Now to Twitter. Twitter has 2.5 million users. That’s 50 times smaller than Facebook’s reach and userbase. Advertising is just not going to generate the money you need to sustain an application and pay for development (I doubt SMS advertising could even bridge the gap, and nobody will use an app that requires SMS ads).

As for acquisition? As I stated before, acquisitions are hard to find in this market, and even when the market was good, the highest acquisition was for $15 million, and was done by Twitter itself. Simply put, your odds aren’t good. When you compare it to the revenue you could generate with an iPhone app, you’re wasting your time. Unless you’re developing Twitter apps for fun of course, but I’m not concerned with that.

Q: Can Twitter applications be built into successful business models with a positive cashflow?

Answer: Eventually, but no guarantees.

Twitter has a growth model, but no revenue. They’re still trying to build their business model. Twitter has vowed to build a sustainable business model this year. But there are no guarantees.

Let me be clear: I do not doubt that Twitter can find a business model. It will. But Twitter’s difficulty with business model reflects on the challenge facing smaller apps. Advertising could be an answer, but you need a lot of eyeballs and an innovative advertising strategy to succeed. And paid applications? Someone needs to prove that people will pay for a Twitter app first.

So is there any real value in Twitter-based applications? The current verdict is: only personally, not financially. You are simply going to make more money writing an application for the iPhone than for Twitter. But if you incorporate a Twitter app as part of your overall strategy, then you’re getting smart. Standalone companies building Twitter apps will probably need Twitter to grow more before they can be self-sustaining. But Twitter’s API is a fun and relatively simple thing to build upon, and because of that, personal projects are always easy to do. They can help build attention for you, or you can test out new development or marketing theories. And that’s a large part of their value.