UPDATED 22:20 EST / MARCH 01 2009

Definition of the Business Model – Twitter Has a Business Model

All this talk about how Twitter doesn’t have a business model. Let’s be clear. Twitter has a business model. What they don’t have yet is a revenue model.

Their business model as Duncan Riley says is not to make money right now. That’s right on the money (pun intended). The correct conversation to have is on monetization. They have a business model and a growth strategy. Their investors (in my opinion) are doing the right thing. Nail the user experience and get the growth on user base utility (aka critical mass) then bolt-in the revenue model later. By that time the differentiation will be size and funding – aka inimitability.

The only thing Twitter has to worry about is profit, and that is something that they don’t have to get all worried about with their last round of financing of $35m to support 29 people. Facebook is taking the same approach. Not a bad business model for an upstart. Certainly, Twitter and Facebook will have to create a great a sustainable revenue model, but now forcing a revenue model actually is counterproductive for the company.

For all those entrepreneurs out there who want to understand more about the difference between a business model and revenue model read below.

Definition of the Business Model

”The totality of how a company
• selects its customers,
• defines and differentiates its offerings
• defines the tasks it will perform itself and those it will outsource
• configures its resources
• goes to market
• creates utility for customers
• and captures profit…

It is the entire system for delivering utility for customers and earning profit from that activity.”
– source: Value Migration, Adrian Slywotzky, Harvard Press, 1996. pg 4.

Thanks for the source credit from Adrians Ghost – The book is a great read for business execs and students. Here is a link.


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