The Ten Ways Twitter Will Permanently Change American Business

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Micro-blogging platform Twitter has 32 million users, which is an increase from about 2 million a year ago, according to research mentioned in The Wall Street Journal. Some Internet measurement services show that figure increasing 50% to 100% month-over-month. While it is not clear that Twitter will become as large as social networks, MySpace and Facebook or video-sharing site YouTube, the company could certainly have 50 million visitors by the end of the year.

Because Twitter can be used with ease on both PCs and mobile devices and because it limits users to very short messages of 140 characters or less, it has become one of the largest platforms in the world for sharing real-time data. A number of large businesses and celebrities have hundreds of thousands of followers on Twitter.  This includes personalities like Oprah and Ashton Kutcher. JetBlue (JBLU), Whole Foods (WFMI), and Dell (DELL), along with other multinational corporations, are also among the most followed names on the service.

As Twitter grows it will increasingly become a place where companies build brands, do research, send information to customers, conduct e-commerce, and create communities for their users. Some industries, like local retail, could be transformed by Twitter. That transformation will occur at one-store operations that cater to customers within a few blocks of their locations and to the individual stores of giant retail operations like Wal-Mart (WMT). In either case, having the opportunity to tell customers about attractive sales and new products can be done at remarkably low cost while providing for greater geographic accuracy.

For Twitter to be a part of a company’s efforts to communicate with customers, the customers must be willing to “follow” the company on Twitter. That allows the individual consumer the chance to choose which firms he is willing to get messages from directly. It may not be surprising that “new age” brands like Whole Foods and JetBlue have large followings and older and much larger brands like Kroger (KR) and American Airlines (AMR) do not. Whole Foods and JetBlue have successfully marketed themselves as being “customer centric”, the kinds of companies that would not misuse the opportunity to have access to a customer’s private Twitter information.

While there may be commercial value for the use of Twitter as a way to communicate with customers, the danger is that the Twitter community could turn against a marketer viewed as being too crass by being relentlessly self-promoting.  Twitter users have set up their own rules for conduct when using the service, not unlike MySpace and Facebook.  These rules were not put together by Twitter itself which only mandates rules of use. Like many social network sites, Twitter is “self governed” by its members and companies must take that into account as they join the service.

Twitter is still in the early stages of developing a plan for making money as a company, but plenty of large corporations like Starbucks (SBUX) are already using it as a marketing tool. Twitter will probably evolve into both a community of individuals and a community of companies which provide goods and services for those individuals.

24/7 Wall St. has come up with ten ways that Twitter will permanently change American business within the next two or three years, based on an examination of Twitter’s model, the way that corporations and small businesses are currently using the service and some of the logical extensions of the ways that companies will use Twitter in the future. Some of these firms are already using Twitter but their efforts are in the earliest stages of development. 24/7 Wall St. evaluated other sensible and potentially highly profitable ways Twitter’s real-time, multi-platform presence is likely to be exploited, in the best use of that word, to expand businesses both large and small.

1.) Hyper-local marketing. Twitter is currently being used as a marketing tool for small businesses. At the same time the local outlets of some of the largest retailers in the world, which are often competing with local vendors, are turning to Twitter as well. As an example, Twitter users can follow the local pizzeria or the store’s owner. Since Twitter is still mostly a person-to-person service and not a business-to-business service, it is likely that the Twitter relationship will be with the owners of small shops. With access to their Twitter addresses these small shop owners can send customers news about special offerings, sales, new merchandises, store hours, or events. International companies which operate through thousands of locations are beginning to use the same methods to gather their own lists of Twitter names. Recently, Starbucks launched a multi-million marketing program in which the company put up advertising posters in six major cities and attempted to “harness the power of online social networking sites by challenging people to hunt for the posters on Tuesday and be the first to post a photo of one using Twitter”, the company said. The project seemed like a good way to get the company’s brand in front of a large number of people online and encourage them to search for ad messages in their cities.

One of the by-products of Starbuck’s marketing foray into the world of Twitter illustrates how social media can be used against a company. According to Alternet.org, filmmaker Robert Greenwald who has done a short video critical of the way that Starbucks treats employees, entered the Twitter contest as a way to get out news about his new film.

Twitter has the potential to drive substantial amounts of business to retailers as diverse as the local clothing store or the Gap (GPS), the local car repair shop or the Jiffy Lube franchise, and the local deli or the McDonald’s (MCD) even though there may be adverse publicity from unhappy customers or disgruntled employees.  The time may come when multinational oil companies with local gas stations can tweet people who want to save money on gas costs when the price at the pump drops a few cents, since Twitter users can follow local businesses and companies closely by zip code. The hyper-local marketing aspects of Twitter have the opportunity to move billions of dollars of business to and from retailers based on targeted marketing.

2) Outdoor ads are used almost everywhere in the world because of their simplicity and the relatively low cost of creating them. Current estimates are that global outdoor advertising sales will be a $30 billion business this year. One of the great weaknesses of older ad media, like outdoor billboard marketing and newspaper display, is that results have been nearly impossible to measure effectively. Twitter will change that. Up until recently, marketers could survey whether people remembered what they saw on outdoor ads and measure the number of cars that passed a sign on any given day. Using Twitter opens up the opportunity to make a very large and nearly unmeasurable medium measurable.

Marketers using outdoor ads will have to give Twitter users an incentive to report that they have seen a billboard.  A Twitter user who sees an ad for a Toyota (TM) Corolla could be encouraged to send a tweet to the local dealer. In exchange he could get a pint of oil or a T-shirt. He will obviously have to come to the showroom in order to get that promotional item. The same principle will apply to newspaper display ads, a shrinking category which is disappearing so fast that it is helping to destroy the newspaper industry. Some display ads have coupons, but the ability of a newspaper advertiser to get reactions back from consumers though Twitter help make another hard-to-measure medium at least partially interactive.

If the use of Twitter to measure these categories of marketing are even modestly successful, it could completely change the marketing methodology and advertising investment that companies are willing to make in outdoor media. That category includes billboard, telephone, taxi, and public transportation. Because Twitter can be used on mobile devices as well as PCs and since Twitter allows messages of a maximum of 140 characters, the reactions to outdoor ad messages can be instantaneous.  Conversely, relying on e-mail responses or postings on MySpace or Facebook requires a much longer and more complex process for both the end user as well as the company. Many people will not take the time to follow through if the incentives to do so are modest. It only takes a few seconds for a Twitter user to indicate that he has seen an outdoor ad or newspaper display message by texting.

3) Twitter will become a huge platform for discussing stocks and other financial instruments and will probably replace message boards like the ones at Yahoo! Finance as the preferred method for discussing individual public companies. The size of the Twitter audience makes it possible for groups interested in one stock to post opinions on that company, trades, research, rumors, and data directly from the company in real-time. A stock with a large shareholder base could have a following that brings in thousands of comments a day. This kind of information market for stocks has already begun to emerge through services like StockTwits. Communities of active investors and day traders who are sharing opinions and in some case sophisticated research about stocks, bonds and other financial instruments, will actually have the power to move share prices. In the cases of some smaller and more thinly traded stocks, this power could be used to spread rumors and influence trading patterns. At some point federal government agencies such as the SEC are going to have to examine how Twitter users access the service to spread information about public companies. Some of these comments are likely to be misleading as is true on message boards because some investors will seek to move share prices up and down based on their volume of messages and the messages that they can get their friends and affiliates to tweet.

As this function of Twitter use grows the community of commentators on any one publicly traded company could become nearly as large as its stock’s daily volume making Twitter-based input as important as any other data on many stocks. Yahoo and other large message boards may start to supplement their services using Twitter, extending the power of the medium to pass along information whether it is accurate or not. Twitter is one of the most disruptive technologies to become part of the financial markets in decades. It will allow individual and professional investors to exchange hundreds of thousands of bits of information about the markets in remarkably short time periods.  The problem will be that a great deal of this information will not be correct.

For people who do not have money to put into the stock market, Twitter will be an ideal platform for fantasy stock trading in which people post the price at which they would have bought or sold a stock. That could become a part of a large contest among people who want to compete with one another to show who can create the best performing portfolio, even without money

4) Much has been written about the democratization of the media and how blogs and other non-mainstream media have begun to supplant traditional media as a source of information, news and entertainment. Twitter will almost certainly extend this trend. Twitter will also expand the power of the blogosphere by further severing the relationship between mainstream audiences and traditional media which have typically been controlled by TV’s distribution through a large number of viewers, in addition to the millions of people who subscribe to magazines and newspapers.

Blogs, including Perez Hilton and TechCrunch, have huge Twitter followings and Twitter will allow content operations which have limited numbers of employees and small distribution budgets access to hundreds of thousands of Twitter users based on the community’s views of the “merit” of their content. Twitter will not only democratize content; it will democratize the advertising that goes with content. Each tweet about a piece of content can be attached to a short phrase or sentence from a sponsoring marketer. This could backfire among Twitter users who sometimes resent the use of the service for commercial reasons. But, that is unlikely to happen in all cases, especially if people following blogs or major media see value in the messages that they get and understand that media cannot survive long-term on free content. Twitter also democratizes traffic because on Twitter traffic does not have to be paid for. Twitter gives major media the opportunity to extend its reach but will simultaneously help media with quality content but no marketing budgets gain access to a large and potentially national audience.

5) Data mining. Collecting data about what people think about products or services is among the most expensive activities of large companies that rely on consumers for their sales. Market research, product development, and research techniques like focus groups can take months to organize and execute.  Large corporations from Sprint (S) to P&G (PG) could find quick feedback on the quality of their products and services, especially ones that have been recently launched on Twitter. Sprint would give a lot to get thousand of responses to the Palm (PALM) Pre the first day that the new handset hit the market.

Twitter is a nearly ideal platform for tapping opinion about customer views of products. Twitter users have the capacity to segment themselves into discrete demographic groups, if they have an incentive to do so.  P&G could arrange to have only women between 18 and 40 react to a new bleach product with instant positive or negative opinion. Because Twitter and the Twitter community encourage users to post information about their biographies and person tastes, many of the demographic aspects of Twitter are already built in. People tweeting about their daily habits are a free focus group on a massive scale, not unlike the Nielsen in home surveys that have been used as market research in the television industry for years. The risk is that users may begin to see Twitter as “Big Brother”, and remove personal information.

6) Large media companies are already using Twitter as a way to alert people to breaking news and new features. CNN, Time, The New York Times, the BBC, the London Guardian, and Good Morning America are among the most widely followed media on Twitter.  CNN ranks third among all the people or companies who use Twitter, with over 1.5 million followers on Twitter. The traditional media are setting up systems to more tightly tie their audiences to them with the use of social networks. Twitter has the opportunity to become a distribution method for premium content.

Tweets can contain short URLs the system can be used to transmit print content, video, or audio files. Movie trailers can be tweeted to hundreds of thousands of people within a short period of time. The same holds true for audio content or links to articles. Video aggregation sites including YouTube and Hulu will have completely new ways for Twitter users to distribute links to their content. Media companies will have the opportunity to send Twitter users, who follow them, summaries of the daily news with links to articles or videos. CNN has already begun to take advantages of this and distributes a number of breaking news links a day to its followers. That gives CNN an advantage over other news services like MSNBC.

News media with the largest and most comprehensive lists of Twitter followers will begin to have distributions channels that are not available to many other media. If Twitter grows to 100 million or 200 million users, major media could have Twitter followers in the millions matching the size of all of their other delivery channels combined.

7)  The use of Twitter for “micropayments”, small loans or payments to companies for services, which is essentially no more than an extension of a user’s PayPal, checking, or credit card accounts is already is in its early stages. Exchanging money, making payments, charging for goods and services through fairly traditional means is only the start of a large independent economy that will emerge on Twitter. One model that is being tested on Twitter allows consumers to sign up and put some cash in a Twitpay account through a payment service like PayPal, and then allows them to send out a “tweet” to another Twitpay member, structured like “@josh twitpay $10 for Burger King.” The Twitpay operation takes a $.05 commission. Its founders are hoping that, eventually, it can be used for charity and disaster relief payments.

Twitpay and services like it will extend the reach of operations like eBay’s (EBAY) PayPal. eBay, Amazon (AMZN), and other e-commerce operations will get a financial benefit from real time micropayments. Hyper-local marketers will also benefit from the ability of Twitter users to make small payments.

Twitter is also likely to evolve into a service like the old Western Union. A customer or business would walk into a physical location and give Western Union cash which would be wired to another location where it could be picked up as cash. For decades the large global florist alliance, FTD, worked in a similar way. One florist would send an order to another. The payments would be settled later by wire or mail. Twitter could well be the basis of a service in which florists, bars, or restaurants could set up payment networks.  A trusted patron at a bar in San Francisco could tweet money to a patron in a trusted bar in NYC. The relationships between customers and businesses would revert, to some extent, to those of another time when bonds were based on longer-term relationships. The advantage of this return to a cash payment system is that a bar where someone can get money from a saloon-to-saloon tweet is a bar that sells more liquor. It is important to remember that millions of Americans do not have credit cards and many do not have bank accounts. Using Twitter as a way to transfer money will makes local businesses into simple versions of banks.

One of the results of this kind of vast and unregulated system for transferring cash and credit is that it could create a sort of black market in goods and services which would be hard for the government to track and tax. Twitter may become a remarkably good way to keep money from the IRS.

8) Twitter may not replace the landline, the cell phone or voice and texting communications but it will certainly supplement them as a way to get around telecom data plans. Tweeting inside a browser does not have the same data cost for the telecom user that texting does which adds another huge non-metered communications opportunity for businesses and consumers. It opens the question of what large cellular services providers will do when conversations move away from their ability to track them.  TwitterBerry accounts, used on RIM (RIMM) Blackberry handsets make it nearly impossible for messages to be tracked by data use.

Telecom companies have chosen to manage user behavior by forcing customers to transfer voice, video, and data on platforms that they can track. Twitter will force telecoms into a position similar to the one cable companies find themselves in. Cable would like to charge broadband users by the load that they put on the local system. So far, the government has rejected that model, but as broadband use grows, cable may not be able to give customers access to unlimited bandwidth because of infrastructural limits. Cellular companies could face an analogous problem with the growth of Twitter.

9) The commercial sector will not be the only part of the enterprise landscape that will be affected by Twitter. Large government agencies will quickly realize that Twitter may be one of the single best ways to communicate with the public and may even mandate that Twitter participate in some programs that allow emergency notices to make their way to citizens quickly. There is some precedent to this with the old Emergency Broadcast System that was used to reach the public over radio and TV starting in 1963. Eventually,  certain departments of the federal government will certainly want to have broad access to Twitter users for sending out information about man-made and natural disasters. People would be asked to  “follow” certain government agencies. In the case of a major hurricane, people in the affected region might have to follow @Katrina @Fema Hurricane. A portable device with GPS would allow Twitter to be used to send or receive messages by location. A person without food or water could send a tweet with the location sent by the GPS on the portable device.

This would add certain “911” aspects to Twitter which could be used for health alerts like following the spread of a major disease like swine flu, @swineflu.  This could be done on a local or national basis, @nyscswineflu.  The service could be used regionally for programs to find children who have disappeared, a sort of Amber alert over Twitter.

10) Philanthropy “as business” use of Twitter will involve social activism and fund-raising.  Tea parties, whether they are held in public or in cyberspace, can be set up by getting Twitter users to follow certain political groups and causes. Twitter will be an immensely useful way for people to voice their opinions in response to public opinion polls.  This offers an opportunity to access tens of thousands of reactions to critical questions in very short periods of time.

The Twitpay aspect of Twitter will become essential to fund raising as people can make donations to a cause while they are in the middle of a march for that cause. And, if social or political groups on Twitter want the government to get a feel for the power of their movements, they can encourage government agencies, Congress, or The White House to follow them as they collect money and work to affect social change.

The Internet and the major products set up to use it are changing at a remarkable speed, permanently altering the way we live. Twitter could have as large a role in this transformation as Google or Facebook have had in the last decade.

Douglas A. McIntyre

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