Sunday, April 25, 2010

Is SMS the new cash cow for twitter?

For all those cynics who doubted the business model of twitter. Day by day, twitter is unleashing their business model, which seems to be very promising. Now what caught my eye is twitters acquisition of CloudHopper , a SMS/MMS integrator company. According to their website, Cloudhopper powers some of the largest and most successful mobile messaging (SMS and MMS) campaigns in North America, Europe, and Africa.. This makes perfect sense, Currently, Twitter processes close to a billion SMS tweets per month and that number is growing around the world from Indonesia to Australia, the UK, the US, and beyond. This is a just one logical step towards monetization. Currently, users can update or receive status via Web interface and mobile clients with an option of SMS. But most of these interfaces use IP as a transport, which is free. However, User has an option to send SMS message to twitters short code, for which, user will be charged by the operator based on his subscription. Except for some developed countries most of the users in developing countries still use old handset that doesn’t have all the capabilities to download twitter apps like( tweetie, tweetdeck etc). So the best choice is to send SMS message to the twitter assigned short code, which is “40404”.

Its worthy of note that the initial concept of Twitter was based on SMS messaging and that is the main reason for the 140 characters size for each status message.

Here is a transcript from Jack Dorsey interview, where he talks about SMS :

It was really SMS that inspired the further direction -- the particular constraint of 140 characters was kind of borrowed. You have a natural constraint with the couriers when you update your location or with IM when you update your status. But SMS allowed this other constraint, where most basic phones are limited to 160 characters before they split the messages. So in order to minimize the hassle and thinking around receiving a message, we wanted to make sure that we were not splitting any messages. So we took 20 characters for the user name, and left 140 for the content. That’s where it all came from.

Even with the advent of so many different features, SMS is still the king and the cash cow for the operators. Verizon had announced earlier that during the fourth quarter Verizon Wireless subscribers sent or received more than 162 billion text messages, more than 4 billion picture/video messages.

So with the CloudHopper acquisition, twitter can actually run SMS based Contest/Campaigns/Events etc. The value proposition here is the revenue sharing deal that they can strike with the operators for increasing the usage of SMS and MMS messaging. In addition, they can charge companies to run the campaign. Imagine Voting for “American Idol” via twitter. Wouldn’t that be cool!

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