Twitter, which was created by a 10-person startup in San Francisco called Obvious, is a heady mixture of messaging, social networking, “microblogging” and something called “presence,” shorthand for the idea that people should enjoy an “always on” virtual omnipresence.

Twitter’s rapid growth made it the object of intense interest and a fair amount of ridicule, as it was derided as high-tech trivia or the latest in time-wasting devices. But its use in Iran in the wake of the disputed presidential election of June 2009 to organize protests and disseminate information in the face of a news media crackdown brought it new respect.

“Twitterers” or “tweeters” send and receive short messages, called “tweets,” on Twitter’s Web site, with instant messaging software, or with mobile phones.

When a user is logged in through the Web or a cellphone, it asks one simple question, “What are you doing?” Users answer in 140 characters or fewer. While some of these tweets have the profundity of haiku, most are mundane, like “Sure is pretty out tonight” or “My eyes itch. I am very aggravated.”

Unlike most text messages, tweets are routed among networks of friends. Strangers, called “followers,” can also choose to receive the tweets of people they find interesting.

When Twitter recently announced the ability to place all of your followers into lists I thought that they had struck a goldmine for future revenue streams and everything pointed towards a business model that made perfect sense – to me.

Then today it all went pear shaped as Biz Stone (Co-founder) announced a ‘non traditional’ way they will allow advertising on Twitter without telling us what it is – a great way to get spin going, especially when you are as popular as Twitter!

In my opinion Biz Stone and Twitter have just showed how dumb people can be when it comes to monetizing popular free programs. What did MySpace do? Sell advertising. What did Facebook do? Sell advertising. What is Twitter going to do? Sell advertising – albeit wrapped in a ‘non traditional’ catchphrase. The crux of all of this is that no-one has any idea how to make money out of free software that is popular and when you have no ideas, you turn to 3rd party advertisers.

Biz, I am sure advertising will bring in some revenue, but you have missed a golden opportunity here to take a different approach, it is a crazy idea, but people might actually be prepared to pay for software that makes their lives better. Here is the model I would have approached.

Premium Accounts

I know a premium account is just a stupid name for making more money than a normal account. Usually companies (think realestate.com.au and domain.com.au) create a popular site and then cut the throat of their core by making them look less important than premium companies. In real estate it is a joke, but with Twitter it would be different as it makes sense on top of a free model. Myhome.com.au do it with premium style listings on top of basic free listings. I don’t mind this approach as long as the user (the person looking for properties) is not getting search results compromised.

Basic
With Twitter nothing changes, you get all of the same features as you currently do, you are treated the same and all new updates are afforded to you. In other words – in other words we still love you and we understand without you – we could not operate successfully!

Premium – Multiple Accounts
You can create multiple accounts all under the one account. As an example. I have Agentpoint, Business2, Ginga and Zooproperty.com. Currently I have 4 Twitter accounts to manage. So I can now have a master account and merge others accounts under this one account – nothing changes for my followers.

When a user wants to follow me they can select what account(s) to follow or ‘follow all’. My default account is my master account – so if they do not choose any accounts, it then defaults to my master account.

Nothing changes when I Tweet as I have separate accounts to Tweet under and no-one gets annoyed.

Premium – Customise Theme
My “Twemium” account allows us to customise our Twitter theme some more. Better sidebar control, better backgrounds etc. All of my accounts now become a part of a left sidebar and can be click-able. I can also customise my background with a few extra features.

Fees

So what would a user pay as a premium price for these features? I would say $55 USD per annum is a fair price that most can afford for what essentially is a great service. Not everyone would need to upgrade and there is no penalty for not upgrading.

Revenue

Let’s say 20% of users upgrade to premium. Current estimates put twitter at about 5 million active users. So that would bring in around $55 million per annum. I would consider this a good return on what is essentially a 100 person company. How many companies could boast $550,00 in revenue per employee? This could easily grow to 100 million per annum.

If they get selfish and stupid they will fail. Twitter is no flash in the pan, but it we may get a little bored with it and if we are not careful only business will be interested and that will kill the platform.

Biz Stone tells us he is in no rush, well, he is in no rush to fail and everything they were doing up until now made sense. If advertiser revenue is their only idea with this software then they seriously need to take more time before making announcements.