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The Database of Intentions is More Valuable than the Database of Musings For Now (Google and Twitter)

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I’ve been very curious to read this weekend’s stream of people commenting on Twitter’s business model and what it will look like. I read this one in Forbes – it talks about how being able to use search and analytics might ultimately deliver a powerful business model for Twitter. I also read Eric Schonfeld’s TechCrunch article on mining the thoughtstream as an encapsulation of Twitter’s potential value proposition.

While both of those articles are interesting, I am having a hard time following their lines of logic around why knowing what people care about right now is a de facto good business model. But reading these articles did make me go back and re-read John Battelle’s article on the database of intentions. Re-reading that post reminded me of two things about what it takes to make a database of intentions valuable:

Not every expression of intent is valuable – Those expressions of intent which do correlate to purchase intent or some other monetizable transaction are extremely valuable and can form the foundation of a multi-billion dollar business (monetizable intent is the foundation of AdWords and AdSense). Doing so, however, both requires being able to capture intent and the ability to connect interested parties with people who can fulfill their needs. That is no small task nor is it easy to pull off at scale.

You need a lot of intentions across a wide variety of interests to build a service that’s useful to a wide variety of advertisers – Being a database of intentions or musings or whatever requires scale. And it’s not web 2.0 scale (millions) but Internet scale (tens or hundreds of millions) in terms of users. Twitter has a long way to go to achieve Internet scale usage – Facebook and MySpace are there already there and it appears to cost a lot of money to get there.

The idea of connecting advertisers with interested parties is not new. We have display advertising, search advertising, direct mail, email marketing, and a host of other channels. Each channel has its own characteristics. Take email marketing, for example. It’s fairly cheap because email addresses can be bought in bulk and you don’t need the user’s explicit permission to send him / her an email – knowledge of his or her email address and a reasonably good reputation as a sender is generally sufficient to have a good shot at getting your message through. But because users get a fair amount of unsolicitied email, the cost of reaching a “blind” user is fairly low and should be low – the odds of successful activation are generally poor (as a broad generalization about the effectiveness of blind email or direct mail).

One nice thing about Twitter as a way to connect advertisers and consumers is that Twitter is primarily an opt-in messaging service. Aside from @replies and DMs, people generally can’t easily communicate with you unless you agree to follow them and tune into their stream. Unlike the open Internet, Twitter controls its own messaging platform – they could make it much more difficult for unsolicited messages to get through to users.

To me, the most important question to answer is whether Twitter wants to be a directory or a utility. Directories get paid for organizing stuff and making it easier for advertisers and users to find each other. Google does this. The Yellow Pages does this. It’s a good business because it helps people on both sides of the transaction and there’s a precedent for the directory company to take a cut of the transactions they enable.

Utilities don’t work like that. Utilities get paid for providing a service, maintaining uptime, and generally being available for use. This is what your local power and cable companies do. It’s a totally different business – you don’t pay your phone company every time you close a deal on the phone. Utilities by and large function on access and usage fees – they don’t (and shouldn’t) get in the business of siphoning off a chunk of the transactions they enable.

Regardless of which approach they take, there are two key questions that I think are worth asking when thinking about using Twitter’s knowledge of what people are thinking about right now:

1. At Internet scale (as opposed to web 2.0 scale), will reaching new or existing customers via Twitter prove to be much more cost-effective or profitable than any other competing channel (Facebook, email, paid traffic acquisition, etc)?

2. Will the accumulated musings of an individual prove to be a better predictor of behavior / interest / intent than search history on the open Internet? Either way, are these two things ultimately competitive or complimentary?

Whoever does the best job of capturing intent and funneling those people toward advertisers will win big. Right now that’s Google. And it’s not obvious to me (yet) why Twitter is the next evolution. Microsoft didn’t become Microsoft by beating IBM in chips and systems. Google didn’t become Google by beating Microsoft in desktop software. And whoever beats Google won’t do it by beating them in web search – it will have to be something different and non-obvious to Google as the incumbent.