In short: Twitter is launching a powerful tool that will make marketers salivate. What's more, it's being reported that the product may start at a surprising price: Free.
Is Twitter simply throwing money away?
Tracking social media is big business, and the news that Twitter is set to enter the ring with a free product of its own may strike fear in the hearts of market leaders. "Social media monitoring" services charge anything from tens of dollars to tens of thousands of dollars per month to provide brands with insights about their social marketing efforts.
The popular product Radian6, for instance, has prices starting at $600 per month. What's more, brands large and small willingly pay these rates, keen to understand what their customers are saying about them on social media sites -- and perhaps influence those conversations.
But few businesses are aware such services exist. Twitter would have the advantage of putting its analytics product directly in front of its 175 million users. With prices ranging from $10 per month for the individual user to thousands of dollars per month for corporate customers, such a service would easily be worth hundreds of millions of dollars per year.
So why wouldn't Twitter jump at this opportunity?
One obvious reason: Businesses are more likely to stick with Twitter if they're able to measure and improve upon the effectiveness of their marketing efforts. To continually update a Twitter feed requires significant effort, and without any evidence that the activity is improving the bottom line, it's hard to make the business case for maintaining a Twitter account.
With detailed statistics made available to every user, however, the story is very different -- a free analytics product would improve the company's poor user retention rates.
There's another reason to make a social analytics product freely available: Facebook already does. Facebook Insights, which provides in-depth data to Facebook page owners, allows news organizations, brands and small businesses to optimize their Facebook usage to achieve their business goals.
Given the choice between paying for Twitter stats or using Facebook Insights for free, perhaps some businesses would choose Facebook as their social platform of choice.
Customer service concerns may also have swayed Twitter's thinking. When using a free product, customers have low expectations about the level of personal service they expect to receive. But once those same customers are paying hundreds or even thousands of dollars for a product, there's a need for a much larger customer service team.
Or perhaps Twitter just wants to get people hooked. While the company is rumored to be launching the product as a free service, there's no reason Twitter couldn't charge for extra features in the future. Offering a free service to get customers in the door (the so-called "freemium" model) could help the company attract more paying customers at a later date.
So will a free analytics product mean Twitter is throwing away hundreds of millions of dollars per year? Not necessarily: In the long term, a starting price of free may make better business sense for the social media giant.
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