The bit.ly Investment Makes Sense to Me (the Feedburner of Twitter)

I saw a blurb indicating that bit.ly raised some money. I use bit.ly and I can see why investors wanted to pony up a modest amount of cash to see if it can become something meaningful. Two quick thoughts:

If Twitter continues to become a place where people share links and articles they find interesting, bit.ly is well-positioned to be the Feedburner of Twitter. So long as the 140 character limit holds and people want to share long URLs (particularly those optimized for SEO juice) on Twitter, users will need a URL shortening service. I see no reason why bit.ly can’t be the de facto service. And if bit.ly becomes the default service people use to rewrite URLs, bit.ly will know a lot about which URLs Twitter users are clicking on and who produces links that generate the most activity. If you believe that Twitter’s value proposition at present is largely about traffic acquisition and a low-cost way to acquire / direct users to your website, being the analytics engine behind link activity is not a bad place to be.

If bit.ly wants to win in a largely commodity market, distribution deals will be key. I’ve used a lot of link shortening services and they’re all pretty much the same to me. I use bit.ly now because it’s integrated into TweetDeck. In a commodity technology market like URL shortening, getting key distribution deals is key – getting bit.ly baked into key Twitter clients and maybe (gasp!) Twitter.com itself will be the keys to winning. This strikes me more as a distribution play than a technology play. Having a few million in the bank should help the company secure those deals and make the case they’re funded to outlast their competitors.

Ultimately, though, I’m not sure that bit.ly will be a big business. Feedburner turned out to be a good investment (Google bought it for a nice fee). Whether or not bit.ly turns out to be a good investment will ultimately depend on whether or not bit.ly can turn URL shortening and analytics into a business. That’s a bet worthy of a few million bucks today. Whether it’s ultimately a money-maker remains to be seen.

  • Quick comment to those who mentioned that this post went out on twitter with a link in tinyurl. The WordPress to Twitter plugin I use only offers TinyURL. Good catch.

  • Good points. But I think bitly can survive even beyond the twitter ecosystem. The analytics it provides can be valuable to small- and medium-sized businesses conducting their own email marketing campaigns (whether through Constant Contact or an in-house system). The timeline component illuminates the effects of externalities on a message's response rate. A bitly link can also be put behind banner ads.

    Beyond marketing uses, a bitly link within an email tells me how many recipients read my email, closing the loop on the message without using a read receipt.

    Even as a meager consumer, I would pay a small monthly fee for bitly.

  • Very good point – I do a fair amount of email marketing myself and think you've outlined a useful use case.

  • As Bit.ly has started out completely free, how will they manage to impose a premium service?
    They will need to build a lot of usefull features into Bit.ly before anyone is going to pay.

  • Yes, I agree – the road for any of the URL shortening services is a long one. There might be an interesting business here, but it's far from assured.