Simon’s Blog

If you haven’t heard about Twitter yet, you’re about to. It’s one of the fastest growing phenomenons on the Internet. What is Twitter? It’s a system that lets you send an SMS text message out onto the Network, to be picked up by anyone that wants to listen. Essentially, people send out SMS messages just saying what they’re up to. If you want to get a feel for how this works, take a look at this mashup, called “twittervision” - you can see people twittering in real time.

The growth in popularity of Twitter has been genuinely spectacular - it’s set to be one of the stories of 2007. Take a look at the Alexa graph below - it shows the strong exponential growth of Twitter since they got going in mid-2006.

Exponential Growth in Twitter Popularity

But I think there could be a problem. A big problem. And that problem is - Twitter isn’t free to use. It costs its users real money to send SMS text messages, and many people will be in for a shock when they realize just what it costs to send large numbers of SMS texts when they go over their monthly allowances. Don’t forget, when people really get “into” Twitter, they don’t just send the odd message here and there. Rather, they have long conversations, almost as if they were using instant messaging (IM). Except it’s IM where each messages costs a significant amount of money.

The way that many mobile phone operators over-charge their customers for SMS messaging could be an accident waiting to happen for Twitter. When you go over your SMS allowance, most mobile operators don’t let you know e.g. by sending you a message letting you know you’re over your allowance. No, they just hike up the price, and sit back and wait while the money rolls in. So people that twitter a lot could easily see their monthly mobile bill spiral to the level of hundreds of dollars. And believe me, people will be unhappy about that. It’s similar to the situation with data charges for roaming across International territories - the mobile operators are happy to let people rack up bills in the hundreds (or sometimes even the thousands) of dollars without letting their customers know.

Now, this kind of business practice on the part of the phone operators verges on the deceptive; and is exceptionally short-sighted. Why? Because in the end, it will simply kill the market; and with over a trillion - that’s 1,000,000,000,000 - SMS messages being sent around the world, it’s a revenue stream that’s worth trying to nurture. Deceptive business practices that leave customers feeling ripped off simply won’t work in the medium and long term. And if people start feeling ripped off by their SMS charges, they’ll stop using Twitter.

If you’re doubting that this could happen, consider the mobile phone ringtone market. Back in 2005, you couldn’t move for technology industry executives expounding on the multi-billion dollar, rapidly growing ringtone market. But the problem was, these services were actually ripping people off: firstly by charging them too much money with prices for ringtones that were out of all proportion with the value of the products; and by using deceptive business practices to sign people up for monthly subscriptions without their knowing.

What happened in that case? Well, people simply stopped buying ringtones for their phones. Consumers worked out that the services simply weren’t good value for money. As an example, take a look at one of the bigger players in ringtones, Jamster, in the graph below. I’ve compared their rise (and fall) with Twitter. Jamster is shown in red, and Twitter in blue.

Jamster vs Twitter

As you can see, Jamster experienced strong exponential growth at the end of 2004 and into the beginning of 2005, with its incredibly popular ringtones. However, when people worked out how expensive it was, they simply stopped using the service. And just possibly, the same thing could happen with Twitter.

Note that the Twitter guys aren’t doing anything that’s remotely deceptive here. Their problem, if I’m right, is that the platform they’ve built their service on may simply be too expensive, and have costs that are too hard for customers to control, to sustain high-usage and growth rates in the long-term.

One thing Twitter could do, I think, is try to do some deals with the phone operators; deals that would let Twitter users access low-cost SMS bundles, so they can send massive numbers of SMS messages without incurring large costs. The phone operators could easily do this, and I think it would be the smart thing for them to do - everybody would win: the phone operators; Twitter; and most importantly twitter users.