Twitter's Money Troubles

Twitter has no problem attracting users to its microblogging forum. But when it comes to matters of money, the company seems to be hitting a wall.

Thus the news last week that Twitter has put a stop to outbound "tweets" via SMS in the U.K.

According to the Twitter blog, Twitter has successfully formed relationships with mobile providers in the U.S., India, and Canada to allow Twitter users to tweet away on SMS -- but no such partnership has emerged in the U.K., causing Twitter to foot a huge bill. "Even with a limit of 250 messages received per week, it could cost Twitter about $1,000 per user, per year to send SMS outside of Canada, India, or the US," writes Twitter co-founder Biz Stone in the blog.

For a company that has yet to figure out a path a toward profitability, that could be problematic.

Rather than resort to charging users for their tweets via SMS, which can often be unreliable, the blog says, Twitter had to resort to disabling outbound SMS.

"Having to disable outgoing SMS to some countries wasn't something we anticipated last year. We've spent a fair bit of effort investigating ways to make SMS work for us as a business, but it's a challenging and complicated space," said Alex Payne, software engineer at Twitter, in an email, following his extensive phone interview with Internet Evolution (presently available on our home page).

"Thankfully, it only affects 2 percent of our users," he said, "and those users will soon have 'longcode' delivery options available to them, in addition to the variety of other solutions we suggested on our company blog." Some present solutions include m.twitter.com, for browser-based phones; TwitterBerry, for BlackBerries; and Twitterific, for iPhones -- among others.

While only 2 percent of its users are affected, the news is indicative of the fact that Twitter is struggling to find a business model that works for itself and its users. There's been a lot of speculation about if and how Twitter will make any money, including the idea of ad-supported tweets. But Payne told us Twitter is generally against ad placement -- particularly in the mobile market which, he says, "hasn't been conditioned to the idea that you get free services in exchange for the occasional ad."

Moreover, along with profitability (or a lack thereof), Twitter is facing challenges in attracting a broader audience and keeping its system up and running long enough to ward off competing services.

To read more about Twitter's struggles, plans, and successes, check out our extensive interview with Alex Payne, where he discusses Twitter's relevance, its future, and its capabilities as a business tool -- along with what's been keeping him up at night.

— Nicole Ferraro, Site Editor, Internet Evolution