Rafe Needleman has a story
today about how Twitter has gone three years without a business model, or a
plan to make money. In fact, they only recently hired someone who’s
specifically tasked with making a business out of Twitter. But as Needleman
points out, that doesn’t mean Twitter isn’t valuable or that it won’t make
money someday. They could just be following the model of several other
Internet-based companies, a model we’ve identified as “Skim, Skimp, and Scrap.”
Needleman mentions ICQ as an example, and FeedBurner is another. 

Step into our time machine to take a look at how it works:

It’s 2004, and a new company called FeedBurner offers a free
service (not even bothering to insert ads). They innovate and add cool
features, relying on viral marketing to build awareness. Within a year they
reach their goal of a million subscribers/users with excellent demographics.

In 2007, it’s time to cash-in. They sell to Google, a
company who knows how to monetize the 1 million subscribers in this demographic.

Skim.  Right
away, Google gobbles FeedBurner’s store of subscriber data to enrich its
database for behavioral tracking and enhance its ad-serving prowess.

Skimp.  And Google quickly adds the service to
its website and bolts-on their ad-serving technology, but that’s about it for
tech innovations. Google developers want to maintain the FeedBurner
technology, but it’s “not invented here” so the code base is not imbued with
the Google DNA.

Scrap.   FeedBurner subscriber growth slows or
stops, and it’s bringing in very low revenue, so Google stops maintaining the
product.

These companies can’t figure out a way to make money but
know that generating a user base will become
their value. Twitter’s Evan Williams is a Google vet so it’s a business model
that he understands (albeit from the other side of the bargaining table).

The only discouraging thing about Twitter’s lack of a
traditional business model, or a mode of monetization, is that Evan Williams
was recently
invited to the White House to talk economics with the president.  This makes me very, very afraid for the next
stage of the economic plan. 😉