Is Twitter’s Business Model the “Firehose”?

Here’s the thing about Twitter that continues to puzzle me: its insistence on resisting low-hanging fruit when it comes to developing a business model.

For a few years, Twitter refused – perhaps that’s a strong word – to consider advertising, even though presenting its users with relevant and contextual advertising was a no-brainer, and something its users would probably accept as long as they were done elegantly.

Eventually, Twitter surrendered its distaste for advertising. It has now slowly started to roll out Sponsored Tweets and Promoted Trends.

So good for Twitter and its venture capitalists who need to transform Twitter into a business from a project – unless they’re pinning their hopes on getting a multi-billion dollar takeover offer down the road, which is entirely possible/probable.

But here’s the thing; there’s another major revenue source that Twitter has yet to fully leverage: the firehose.

For those of you not familiar with the firehose, its the data that flows through Twitter from its 175 million users and the 155 million daily tweets. That’s a lot of valuable data that can be used for a variety of reasons by Twitter and third-parties.

Currently, Twitter charges some companies to access its data but most companies pay a modest amount or nothing to access the data stream. But as data becomes more important, the value of Twitter’s firehose becomes more valuable. It means that Twitter has a huge revenue source under its nose, as long as Twitter is willing to capitalize on it.

So far, it’s not clear whether Twitter has decided this is a lucrative option. It goes without saying Twitter’s relationship with third-party developers has run into some rough territory so Twitter needs to be careful about how it gets more revenue from selling access to its data.

But there are indications the market is willing and ready to pay Twitter to create and grow their own business. Case in point is SocialFlow, which analyzes Twitter’s data to help customers use Twitter more effectively. TechCrunch reported recently that Twitter recently provided SocialFlow with more formal and long-term access to its data.

It may be only one deal but it illustrates where Twitter should be going. At the end of the day, Twitter’s value and the major source of its revenue is its data. It’s a simple proposition that Twitter must embrace, even it means pisses people off.

Forget about advertising or premium services such as analytics; they’re frills while data is the golden goose.

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