August 28, 2013
Get ready for the barrage of bad speculation about Twitter and its imminent dominance of online retail. If you didn’t hear already, Twitter hired Nathan Hubbard, a former Ticketmaster exec, to figure out its commerce revenue stream. Interesting yes, but game-changing, no. Here’s why: startups tend to look for smart people first and figure out their jobs later. The mentality often goes like this: “We need to figure out what we’re going to do in X, this guy has a rock star background in it, let him build a team and see what happens.” And even if the person doesn't succeed, it's OK. They move on. These people have great resumes. That said, here are the biggest reasons for my question marks around Twitter’s success in commerce:
- What works best in commerce is something Twitter already gives away for free, which is its tweets. For example, some of the most successful users of Twitter in a retail context are companies looking to liquidate inventory or send notes about limited supply of promotions, like the Dell Outlet or Groupon — all done effectively via a tweet. In many ways, a tweet is like an email title — it draws people into a click with a few sexy words. The challenge is that tweets have the same problem as emails: they don’t make their technology parents any money because everyone gets to use the tools for free.
- Twitter hasn’t been a hit for most retailers to date. In fact, that applies to all social networks, even including the one I’m most bullish on for commerce, Pinterest. Sponsored tweets could have some promise, but if they’re only discounting products, it’s a double-edged sword for retailers. Twitter experimented with card-linked offers with American Express, but the promotion type is still too young to have a significant impact anywhere. Retailers have been talking for a few years about empowering local stores to send tweets to nearby shoppers about new merchandise or time-limited offers, but that was a model Foursquare already tried awhile back also with limited success. It’s just hard to see what can happen in the confines of 140 characters that could drive sales other than, well, a sale.
- Twitter’s biggest guns are focused on brand marketing, with a special emphasis on TV and multiscreen usage. Every Twitter executive that speaks publicly will talk about the enormous influence that Twitter has throughout the world during key media moments because people increasingly have their phones with them while watching television. As for why that’s more promising, Twitter is able to rely on old-fashioned metrics like reach and big dollars from large brand advertisers. And because of a huge acquisition (i.e., Bluefin Labs), it's got data to prove that reach. I’d say that represents Twitter’s most promising revenue stream.
I wish anyone tasked with growing Twitter Commerce the best of luck. Twitter's a great place to land, but the odds are against Twitter Commerce ever being a gravy train. My final disclaimer to all this is that I'm a huge fan of Twitter’s CEO Dick Costolo. I love his spirit, candor, passion, and intelligence. And honestly, I love Twitter as a user. I've no doubt it will make money, lots of it, but like Facebook, it will have its work cut out for itself trying to sell anything directly to consumers.