Twitter has come a long way since inception. It used to be you would have to login to a rather crude web-based client, write your 140 characted, click post, and that was that. It was so simple and there was only one way to do it: through Twitter’s website.

Fast forward to today and you’ll find no shortage of ways to post your tweets. There are endless numbers of desktop based applications that users can install and use to easily tweet. Almost every smart phone is now supported with a mobile client by Twitter as well as countless third-party developers. There is also web-based software that users can tweet from in case they don’t fancy Twitter.com for some strange reason. One of the coolest ways to tweet is TwitterBar. It allows you to tweet from Mozilla’s Firefox address bar! It was recently acquired by HootSuite which speaks to how popular it really is.

I’m discussing this because it’s very important to Twitter’s revenue model. Twitter drives it’s revenue from a variety of ways, one of which is “Promoted Tweets.” A promoted tweet is a saying or hashtag phrase, usually relating to a slogan or brand name that a company pays Twitter to have appear on “trending tweets” and most pages of Twitter. Almost all users of Twitter are exposed to these promoted tweets regardless of whether they use Twitter’s own applications or third party applications.

The problem with Twitter’s other sources of revenue is that they are primarily generated from users being exposed to ads on their website and mobile applications. This wouldn’t seem like a problem to most, except when you consider that a large portion of Twitter users are using third party Twitter platforms, hence they are not supposed to Twitter’s ads. So how does Twitter make any money from these users on third party platforms and applications? THEY DON’T! There are millions of users who use Twitter but never contribute any value to Twitter (they are not exposed to ads and thus Twitter doesn’t make any money from them). So why does Twitter allow third party applications if they don’t make any money from them?

Twitter allows third party applications because it helps to build the numbers of users in their system. That still doesn’t get around the fact that Twitter is letting third party application developers and their users use their API and software for free! So how does Twitter take back what’s theres?

While Twitter does not have any set in stone plans to deal with these issues, they could look to implement a revenue sharing program of some sort with developers. This would see develops pay Twitter $x per every user active in their system. It’s just an idea. One thing I do know is that Twitter needs to do whatever it can to make sure users are downloading their own mobile application and not a third party one! That’s one way to make sure they continue to grow revenue! Twitter’s deeper integration with iOS5 definitely takes steps to right the ship. Thanks for reading!

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