Is Twitter Trying to Be Unimaginative at Making Money?

For much of the last two years, Silicon Valley's favorite parlor game has been guessing how Twitter would eventually make money. The much-hyped company is now valued at more than $1 billion, yet for its first three years of existence it had no meaningful revenues. At a conference last November, Twitter's chief operating officer, Dick Costolo, hinted that a business model was in the works, and that it would wow the tech punditry. "It will be fascinating and completely nontraditional," he told the audience. "It's going to be really cool."

Yesterday Twitter unveiled its fascinating and nontraditional business plan, and it is … drumroll please … search advertising. Upon this announcement, a heavy sigh emanated from the Internet. In Silicon Valley, where tradition falls under the boot heels of revolutionaries every five years or so, it's hard to think of something more traditional than search advertising, which Google perfected nearly a decade ago.

The failure here is not inherent to the advertising model itself. Many of the third-party applications built on top of Twitter already feature ads, and Twitter arguably should have developed its own ad platform long ago. But yesterday's announcement seems to hint at a failure of ambition. The company's executives once thought Twitter would become a kind of global "nervous system." It seems a waste to help give voice to the collective consciousness of the world, and then offer it a half-price Frappuccino from Starbucks.

That's especially true because there are far more captivating—and potentially lucrative—alternatives right in front of Twitter's eyes. Last week a research paper by two Hewlett-Packard computer scientists debuted with a fascinating, nontraditional headline: "Predicting the Future With Social Media." In it, authors Sitaram Asur and Bernardo Huberman reveal how they successfully used tweets to predict the box-office take of new movies. Their model estimated the new Amanda Seyfried movie Dear John would garner $30.71 million on opening weekend; it did $30.46 million. Asur and Huberman thought The Crazies would reap $16.8 million; it took in $16.07 million. Understandably, the researchers have been receiving a lot of calls from studio marketers and movie producers. Meanwhile, there is a "serious, ongoing discussion" at HP about how to make money off this idea, says Huberman.

It's smart for HP to have that conversation—it's just a shame that Twitter isn't having it too. (At least not publicly.) Now that they have a mainline into the pulse of the planet, it shouldn't require an overzealous imagination to find lucrative ways to mine it. Predict sales for a new gadget, voter turnout in an election, the impact of an ad campaign—there's no shortage of opportunities. And Twitter has privileged access to all the tweets flowing through its system. It could create analytics software or even an in-house consultancy to spin social-media magic for well-heeled corporate and financial clients. As Huberman's phone can attest, companies are interested in these results, and willing to pay for them. And if Twitter doesn't realize that potential on its own, someone else is going to do it for them.