An Open Letter to Twitter: Let me pay for better service | Hacker News Reader

An Open Letter to Twitter: Let me pay for better service

vocamus.net

76 pointssiddhant44 comments

People who want to pay needs to understand that:

A. You are the exception. I am willing to bet .1% of users would be a overestimation of Twitterers willing to pay.

B. Setting up premium accounts and a payment system would probably run fairly close to break even. Not mention the additional customer service that would be expected and the complications that arise from splitting the userbase.

C. You aren't the real money. Twitter wants Coca Cola's money, CBS's money, etc. They don't care about pocket change from Joe Blogger. They are selling a package of 200 million people straight up, not a package of 200 million minus the most engaged and loyal users.

Do you really think the portion of the userbase that uses Twitter for work is really that small? I'm thinking of all the businesses, news networks, marketing, etc. that is done through the service. I don't think it's worth splitting up current development resources, but it's definitely worth thinking about as a direction of expansion.

Yeah but those companies, Coca Cola etc, can only pay as long as Twitter have the user-base. And if the adverts cause users to go visit the site less, then their revenue stream from advertising would shrink.

Would they put averts in the Developer-API responses too? One one hand it's free to use, on the other hand it's being paid for by advertising. What company wants to be a slave to advertising companies? That sounds like a difficult situation to be in.

A 30-minute long TV show is actually only about 21.5 minutes long. The rest is advertising. People will tolerate it if the rest of the content is relevant and engaging.

If the ads are well targeted then they make people even more accepting of them.

I pay Netflix $9 a month and I have no commercials to speak of. What is the marginal ad revenue of every user on Twitter? If it's <$1/mo then there should be a premium, ad-less Twitter available for purchase at $1.99/mo.

You're not accounting to the effect a premium service has on marginal ad revenue per user. It goes down as the people with disposable income (the most desirable demographic) opt out of ads.

I bet th effect of even of the most engaged users isn't worth $10/month in ad revenue. Although I think there would be an irrational element in the pitch of reach the whole Twitter userbase vs reach the users that haven't paid.

You also don't (yet, at least) pay for "new" content. People sitting through commercials (or paying for cable) get content before it is even available to you.

Such is the nature of disruptive technologies. The "yet" in your comment speaks volumes on the impending doom of traditional, multi-channel television. The core value of Twitter, however, is the fresh and organic nature of the information flowing through it. Netflix relies much more on quality than newness. The major difference here is that advertisers are paying to have information artificially inserted into the Twitter-verse where the core value is the organic nature of the content. A subscription greater than marginal ad revenue would greatly increase the amount of organic info on Twitter (both to subscribers and free users) which would lead to more users which would lead to more overall ad revenue.

I don't think this argument really applies to TV, where viewers really haven't had any voting power about ads. Until very recently, they either watched TV or didn't, and I doubt people ever stopped watching TV and stopped digesting TV media because of ads.

As someone who runs a site that receives similar requests (I paid for reddit gold, why don't I get faster access), let me tell you, it just isn't that easy.

Their architecture, like ours, can't just be split into fastlane and slowlane.

So while I appreciate what the guy is asking for, it just isn't that easy.

Flickr's the exact same, as I'd imagine most big sites are.

Really the only way I can think of providing fast vs slow with most sharded architectures is to slow down the non-payers as opposed to speeding up the payers (which is obviously a horrible idea).

I'd like to focus on the two benefits that the OP mentioned: speed and reliability.

The obvious idea to speed up the pro experience would be to isolate pro accounts on their own shard with fewer accounts per shard as compared to the non-pro shards. This might provide some improvement but not much. And here's why:

1) People that pay for pro generally use the site more which means that they have more photos, more comments, more faves, more everything. The advantage of not fighting others for the same resources is quickly dwarfed when you have an order of magnitude more things to keep track of.

2) The majority of the site is still non-pro. This means if there was some speed-up by isolating the pro accounts (which, as stated, I doubt there would be), you'd only enjoy this speed when you're visiting other pro accounts which would limit your ability to have a fully fast experience.

The second request concerns reliability.

This one is easy. Maintaining two versions (ie, the fast and the slow versions) of an application involves two paths through the code. More code and/or differing architecture means added complexity. More complexity means more opportunities for things to go wrong, either in code or deployment. More things going wrong means a less reliable site, so by definition increasing reliablity for a subset of users but not another set makes the site less reliable.

Oddly enough, it's something that Livejournal does: http://www.livejournal.com/support/faqbrowse.bml?faqid=74

Last.fm do something similar: subscribers get a special cookie which jumps the queue on the http load balancer (perlbal).

Thing is, if there are queues at the load balancer, something already went wrong.. so it only really benefits subscribers on certain, rare occasions.

They also wrote their own web server.

It's amazing to have watched Twitter grow in the last four years. Now people even tweet from space. I think with regards to the architecture, it's not an old problem, and there are existing solutions from much larger entities. If they had the money, they could invest in an architecture worthy of a communications system that is so ubiquitous that it is being used to ignite social revolutions, manage humanitarian crises and talk to people buzzing around the themosphere in a tin can.

It's time for some real upgrades. And they do have a user base to support that. I would most definitely pay for better Twitter services if they were available. I think the question is, how do you not neglect the people are unable to pay for these services? How do you make it a fair service?

Ha! The only reason I clicked on Comments here was to say, "I feel the same way about Reddit that this guy does about Twitter." Paid for Reddit gold, got the same lousy site availability.

I used to be in Web publishing. I understand how difficult it is to make money off of smart people on the Web. They know how to block your ads, and even if they refuse to block them, they ignore them. The real money is in stupid people who use IE6 and click on everything that blinks.

If it were easy to figure this shit out, there would be a lot more valid competition.

The same could be said for TV. The solution is to cater to those that would pay attention to ads on TV, ergo, dumb content like the history of Rednecks on Discovery (or so I hear).

It's like I'm a mind reader or something. :)

Twitter can't let you pay them. That would immediately cap the market value of each user and Twitter's target valuation per eyeball is way more than you'd likely be willing to pay.

Interesting point. Let's see what that really means.

Twitter was on track for 200m users in 2011 [1]. Twitter was valued at 7.7b dollars a few weeks back [2]. That's about $38.5 per user. Surely fewer than half the users would pay for Twitter, which would mean that those paying must be worth at least 77 dollars. At a discount rate of 15%, each of those paying customers must yield 11.55 annually in free cash flow (i.e. after costs) to justify Twitter's valuation.

Of course, Twitter could always find ways to extract money from the non-payers, but yes, you bring up a great point: Is it reasonable to expect that half the users will pay about $12 bucks a year on top of his fractional costs to continue to use the service?

[1] http://www.tgdaily.com/software-brief/52284-twitter-on-pace-... [2] http://www.mediabistro.com/alltwitter/twitter-7-7-billion_b6...

Cool, real numbers. :) I think monetizing by any means half of all users is very optimistic though. I have several accounts, long dormant, created as jokes. If that's typical (perhaps not), you'd have to divide by at least five or ten to get a real eyeball count.

http://twitter.com/#!/cooltedsays

You made my day. I have been utterly confused why I had not seen DCF analysis used much on HN, given the nature of the site.

That's based on the assumption that Twitter's market value should be equal to the amount of revenue that they pull in on a yearly basis. Somehow that doesn't seem right to me.

No, please read my comment again (I apologize if I were being unclear). I calculated how much free cash flow (a flow, which means it's not a stock) must be generated from each paying member (I assumed 50% paid) in order to justify its most recent valuation.

It certainly is not revenue ("i.e. after costs"), and is on a flow.

Believing that I said Rev(t) = Market Cap(t) is very wrong because I said Market Cap(t) * 0.15 = FCF.

Ah, I missed that. Though I was under the impression that revenue was cash flow, and that profits were 'after costs.' Maybe I'm misunderstanding the different between free cash flow and revenue.

I didn't understand half of what you said... where would be good to start reading if I wanted to learn more of this stuff?

Explain? I agree that the LTV of a Twitter user is higher than he thinks, but don't get the "capping" thing.

(I think Twitter "pro" accounts are a bad business move for other reasons, in the same sense as Google Search Appliances might be more trouble for G than they're worth).

Fake numbers: Pro accounts will go for $10/month, but Twitter promised investors that free accounts are worth $20/month. This is going to lead to some awkward questions, like "How do we convert the pro users to free users?", or they'll be forced to revise down the expected value of a user.

There are a lot of companies with freemium models that work, but they mostly treat the free version as a loss leader. I don't think Twitter is valuing its free accounts in loss leader territory. That's my take, anyway.

If Pro users pay for quality of service, you can probably still sell ads to them, or sell their data to marketers; that's what I was thinking. I agree that Pro users won't be lucrative for Twitter.

They might just be indirectly lucrative: pro users might just happen to be the ones contributing the most to the Twitter firehose, thereby generating traction for free users. In short, even if not lucrative, pro users may be a worthwhile investment.

They'd still have ambiguity in ad sales revenue. And if this development is as profitable as this guy claims, I don't think twitter will be concerned about how accurately people can value their company. The price will tend toward actual worth and profit per share in the end anyway, so they'd probably prefer the profitable decision over the ambiguity of their target valuation. That's not to say I think it would be profitable, but if it is, they should definitely take the concretely profitable choice over the choice which allows investors to believe they might be a little more profitable than that.

While this person would be willing to pay for twitter, giving a payable, better option, would make much of the user base feel like they're paying for something they should have and always have had for free. Blogging and microblogging have appeal in their universal availability, don't they? Either nobody would buy it, or everyone would and some twitter users not willing to pay will lose loyalty to Twitter inc for asking them to pay for the product which works. Creating pro accounts would be like handing out 600 sham-wows, and informing everyone that the sham-wows do not absorb properly, but they can pay for a working one. If the majority of the people liked it, why inform them that the product they are holding is sub par? And if one were to argue that this is a concern of the majority of users, then twitter would have to just fix the problem to hold onto such a huge percentage of their user base, not create fixed pro accounts and essentially ask people to leave if they're not willing to pay. Either way, loyalty and new accounts would drop, which would undoubtedly affect ad prices in the long term. Also, why the hell would twitter spend time and money debugging and then apply the improvement to only a select few users? They found the problems, why not just increase the comfort and experience of their website for everyone and establish a larger and more loyal user base? That'd kick up their ad revenue far more than any alienating platinum account will. At this stage of the start up game, Twitter better focus on creating the most loyal and comfortable user base they can, and work on finding a stronger long term source of revenue. This would be a short term pay off for twitter, and they're definitely working to break out of fad status rather than make a quick buck. Twitter is the only product I've ever observed that most celebrities and news stations use regularly that I can't convince most of my friends to get into because "its stupid and pointless" (Besides exploitation of public sympathy toward third world countries maybe. MAYBE.) Until Twitter doesn't have a user base which loves them and general aggression from everyone else (probably within the next few years), they can only debug and look for sources of revenue which won't create discomfort.

(To the Y combinator people who read this as they evaluate my application: Hey guys, Love your work, I got pretty into HN. I'd just like to mention that this highly informed and apt internet user states that he gets all of his news from Twitter right now. Just sayin'. Thanks, Donny P.s. I have a new twitter account, and its MrGreenbergMD. I listed a different account on my application.)

Vote with your cash: buy a 3rd party Twitter client and skip the ads altogether. Maybe Twitter will come back to their senses and provide an ad-free, paid Tweetie^W Twitter app again.

Bad idea for twitter. They can't get rich off a couple bucks a month for a tiny segment of their user base, I doubt they can even break even.

Worse, having a pro account would cause ad prices to plummet. Who's going to pay premium prices for ads when the people willing to spend money have opted out of seeing them?

I wouldn't mind to pay for a twitter pro account myself (although I'm on a tight budget momentarily). How would this option hurt the current free business plan? I think there is even a possibility that it would enhance the perceived value not only with current users but also for would-be users. Could it be that there is some kind of inferiority complex behind the lack of decisiveness by twitter management? It's not 2007 anymore, a lot of people "got it" till now. The problem isn't the monetization of the service which could drive people away, it is the potential incremental death of the culture which would. Twitter management just need to carefully observe successful services like github or flickr (pre & shortly post yahoo) which were magnets to mavens and spread from there. Examples for big mistakes in that regard recently were Sony (killing Linux support for PS3), Nintendo (generally too many "casual games" over the last couple of years, and now the 3DS region lock - first on a Nintendo handheld). I know those companies are highly profitable but I see their base crumbling already which always are the "power users". I know talk is cheap and things are not that easy but don't be stupid, think 2011 already.

I agree with everything you've stated. I'd pay just to remove the dickbar.

I don't think that Twitter having any sort of paid service model would correct any of the beef that the author has got with them. I use Twitter on a pretty frequent basis just like the author claims, but have very few of the same arguements. The "Who to follow" section for me is always fairly accurate, suggesting individuals who are posting useful and cool information similar to what I already read. I've had very few UI problems with either the web client or the iPhone app. Kinda just sounds like the author either didn't really use it enough to find it useful, or just griping about simple problems that all social network sites will eventually face.

How much would you actually pay for twitter? $2/mo.?

Twitter is trying to make way more money per month from you via advertising.

Economics of startups and ad industry is a lot like that of farmers and corn. Hard to find quality food without junk load of corn syrup in it, and farmers are always poor. Ads, like corn will keep winning unless tech crowd is able to think of equally innovative ways of monetizing their innovative ideas.

What is the actual issue?

What is the technical problem that Twitter are actually facing? Does it simply come down to something like processing power?

I will definitely be willing to trow 5 bucks a month for a PRO account that will let me read other people private messages.

OK, maybe I was wrong and this article did do something.

http://news.ycombinator.com/item?id=2371530

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