Growth then Capital, or Capital then Growth? Twitter and Yammer Duke It Out – in 140 Characters or Less, Of Course 2

By Molly Galler

In Monday’s New York Times Claire Cain Miller compared the web’s two most popular micro-blogging websites Twitter and Yammer, and pointed out to her readers that although both sites offer a similar service, they have polar opposite business models.

Twitter which has had over 3,000,000 users since its creation in 2006, asks users the question “What are you doing?” to which the user posts “tweets” in 140 characters or less. Anyone can use the site, and is free to “tweet” about whatever they like.

Yammer, a newer service, is aimed at corporate clients and asks the question “What are you working on?” The service was designed to allow coworkers to communicate without flooding one another’s email inbox. To date, Yammer has 60,000 users.

Although Yammer my not boast the same user numbers as Twitter, it is bragging about something else – revenue. Yammer’s Chief Executive David Sacks explains:

“Yammer’s business model is compelling because it spreads virally like a consumer service, but earns revenue like a business service. Anyone with a company e-mail address can use Yammer free. When that company officially joins — which gives the administrator more control over security and how employees use the service — it pays $1 a month for each user.”

In September Yammer won the TechCrunch50 prize for start-ups and on their blog TechCrunch called Yammer “Twitter with a business model”.

The folks at Twitter would have to disagree. With $20 million dollars in backing from founders and venture capitalists, Twitter firmly believes growth is the top priority, and the key to the success of the business. Miller reports:

“Like the value of the telephone network or the Internet itself, the value of Twitter increases with the number of users. So growth is its top priority, said Evan Williams, Twitter’s chief executive. “If we spent time monetizing early on, it would have meant we weren’t doing other things that made the product better for users,” he said. Registrations have grown 600 percent over the last year.”

Although growth is clearly the top priority for Twitter, the executives are aware that as the economy seems to be taking a downward turn, it’s wise to have a plan B. Twitter is considering charging companies who wish to use Twitter as a platform to respond to their customers, and monitor what they are saying.

But at the core of its business model, Twitter still believes growth should come first. Chief Executive Evan Williams compares Twitter to Google, saying to Miller:

“He (Williams) noted that Google itself began as a search engine with no revenue before finding the lucrative advertising model that has turned it into a business titan. “It was the classic story of not worrying about monetization yet and getting their product right”.

At the close of her piece, Miller argues that no matter the number of users, or the potential for growth, in an economic crisis, Twitter may have no choice but to shift its focus to the bottom line.

Which business model do you support – Capital then growth? Or growth then capital?

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2 thoughts on “Growth then Capital, or Capital then Growth? Twitter and Yammer Duke It Out – in 140 Characters or Less, Of Course

  • David

    It’s all about the ability to communicate effectively with the latest technology. The marketplace will determine which business plan wins out. Ease of use is paramount.
    Anything that improves communication bewteen colleagues, constituants and potential clients is a good thing.