Why Twitter Matters

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Developer-Friendly

It may seem to Arrington that everyone he cares about is Twittering. But despite impressive growth, Twitter's universe is small. Estimates for the Twittering masses range between half a million and one million active users. Even if this undercounts the number of those who post their tweets through cell phones or other sites, Twitter is still pint-size compared to Facebook, with its 70 million users. And even on Twitter, plenty of people predict that the crowd will abandon the service en masse when something more alluring turns up. "Too flakey, both technology wise and audience—too fickle," tweets one.

Still, there are a few reasons why Twitter might endure. First, it's simple and easy to use. What's more, Twitter is weaving itself into larger networks. Most recently a link with News Corp.'s (NWS) MySpace will enable users to shuttle data between those sites, eBay (EBAY), and Yahoo! (YHOO).

Also, like Facebook, Twitter has a large and vigorous developer community. "It's already a platform, a classic textbook definition," tweets Jonathan Yarmis of AMR Research. David Troy, for example, founder of Roundhouse Technologies in Baltimore, recently launched a geography application called Twittervision, where you can click on a country—say China—and see the tweets as they appear. "We have more local stuff coming," he says. Another application, called Twistori, shows a stream of Twitters showing what people are wishing, feeling, thinking.

Promotional Tweets?

Businesses, of course, are more interested in what Twitterers are buying. Dataminers like Seattle's Visible Technologies are helping companies such as Hormel Foods (HRL) and Panasonic pore through millions of tweets, finding customers talking about their products. Dell (DELL), a Visible customer, scouts out the tweets and dispatches its Twittering workers to jump into the conversations. At a conference last week, the company claimed to have boosted sales through these efforts by $500,000 in recent months.

Lots of other companies are starting to use Twitter for quick customer service. To see whether they were really on the line, we held a race. We sent a tweet. Seven had responded within an hour, led by H&R Block.

The Search for Viability

One of the last questions we asked: If you could invest in Twitter, would you? It's a key question. To get the funding it needs for its tech upgrade, and perhaps an eventual stock offering, Twitter needs to make a viable business case. If it falls short, Twitter is more likely to wind up as an application in a larger Web company, such as Google (GOOG). The company has launched an advertising program on its site in Japan, but it's "largely experimental," Stone says.

Twitterers, of course, have all sorts of ideas about how to monetize the system. Some suggest subscriptions, or perhaps using promotional tweets every once in a while tied to the words in tweets. Stone avoids details. The goal now, he says, is to raise money, nail down the technology, and grow Twitter until it's enormous. Money comes later. But he and the others know that if they wait too long, Twitter risks disappearing into the belly of a competitor or succumbing to copycats. And that's provided that those of us who Twitter so prolifically now are still hooked on 140-character communications.

Check out the BusinessWeek.com slide show to learn more about the Twitter story.

Baker is a senior writer for BusinessWeek in New York.