Jack Dorsey on Twitter’s Business Model

In this video from the “21st Century Individuals vs. 20th Century Organizations” session at Techonomy 2011 in Tuscon, Ariz., Techonomy’s David Kirkpatrick asks Twitter co-founder Jack Dorsey to explain the success of Twitter’s business model. The ad-driven model works, says Dorsey, because Twitter introduces users to people and products they’re already inclined to like.

In this video from the “21st Century Individuals vs. 20th Century Organizations” session at Techonomy 2011 in Tuscon, Ariz., Techonomy’s David Kirkpatrick asks Twitter co-founder Jack Dorsey to explain the success of Twitter’s business model. The ad-driven model works, says Dorsey, because Twitter introduces users to people and products they’re already inclined to like.

Kirkpatrick: Let’s talk about Twitter for a minute because I’m a big admirer and user of Twitter and we love the TE11 hash tag for this conference, et cetera, but I still am confused where Twitter’s business model really lies and how Twitter is really going to ever grow into this—what is it—$7 billion dollar valuation, something like that that it has?  So explain why I should not be skeptical.

Dorsey: Well, it’s—The business model is really focused around serendipity. So you have expressed interest, you follow certain people, you are searching for certain things, the world is trending certain things—all of that following, all of that interest expressed is intent. It’s a signal that you like certain things and we have all of this amazing content. We can introduce you to content in ways that you would have never found it before—never consumed it before. So when you look at the service, you look at promoted tweets, promoted trends, and promoted accounts. You actually see introductions to content, to accounts or to topics that are deeply meaningful to you because you have already expressed interest, because you have already curated your timeline, and it’s a delightful experience and it feels good. We wanted to build a business model—We wanted to build a monetization strategy that felt like it was part of the network.  The engagement around it has been fantastic. We have anywhere from one to five percent engagement on these products.

Kirkpatrick: On a typical inserted ad in the stream?

Dorsey: Yes.

Kirkpatrick: One percent—which is very high considering the ratio of clicks to typical internet advertising.

Dorsey: It depends on the content. We have three products so we have the accounts, we have the trends and we have the tweets but all them are things that people see every single day and they actually bring more meaning and more definition to whatever you are looking at.

Kirkpatrick: And you can really have enough of those to be worth $8 billion dollars?

Dorsey: That’s huge, huge volume.

Kirkpatrick: You’re not going to piss me off by having these in my stream when I’m trying to see what is happening in Techonomy or whatever?

Dorsey: What matters most is the user experience. So if the user experience fails then we have the wrong model. Our users have shown—and the advertisers keep coming back and back and back—that it is working. That it is engaging. That it is useful and it is delightful.  You know when AdWords first launched with Google, people were somewhat resistant to having these ads in their search results but I find, and Google has found, that it makes the search results better and it makes search better because you are expressing intent again. It’s something that you are looking for. It’s not a typical banner ad which is just broadcasting their contents.

Kirkpatrick: So you are with Mark Zuckerberg who says “Advertising should be content” because if it is targeted well enough, it’s something you actually want to see. Is that more or less what you are saying?

Dorsey: Well I think of—You know I don’t necessarily think of it as advertisement in the traditional sense. How do we introduce you to something new? How do we introduce you to something that would otherwise be hard for you, or difficult to find but something that you probably have a deep interest in discovering? It’s really just another algorithm or just more curation but it’s something that you would find delight in anyway.

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