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In the past two days a wind of optimism blows over the tech blogosphere:, the  microblogging service of Evan Prodromou, made  it’s debut,  throwing the dice for two very important issues: Scalability  and innovation.

Scalabitity has been tantalizing twitter to the point of causing a mass user exodus.

Twitter competitors (Pownce, Jaiku, Plurk etc) have not brought really important new features to microblogging. It is also  debateable whether the ones they brought have the power to attract some of the fleeing twitter users in the long run.

In contrast,, or rather, the underlying, the open source platform is built upon, has brought in the scence two things long desired and awaited: federation and open source.

Federation in microblogging means microblogging services ‘talking’ to each other, i.e. users of one service befriending or following users of another and vice versa. A federated microblogging ecosystem is the answer to the scalability issue.

Open source means innovation, means that now there is a platform the thousands of briliant developers around the world can peep into, in their free time, and contribute tons of new code and new ideas.

In the microblogging world to come, there will be no single big provider that dominates the game, but rather small or medium ones, spread all over the globe.

Yet, however appealing this vision might look, one has to think the mundane realities: how are these service provides going to make a living? In other words, what business model is appropriate for them?

Twitter has no business model. And so do many other web 2.0 ventures. As an answer to this, we hear pretty often that it does not need any. Once a sizable community is formed around twitter, the business model (or, rather, the advertsers) will follow.

The same line of thought cannot be applied to federated microblogging though. With practically not existent barriers of entry, new microblogging services can sprout like mushrooms everywhere, each attracting a small number of users and, therefore, never attaining the magnitute twitter aims for.

What are the options then? I would say only three, none looking  a really viable solution:

  • Charge for premium  services
  • Revenue sharing for SMS originated updates
  • Whatever ad revenue stream can be generated (i.e. adwords)

The first option should rather  not be  accounted for: extra storage or page customization or high profile accounts (: the model) are not a serious bait for users to spend their bucks.

Revenue from SMS updates,shared with the telcos, can be a serious source of income. Yet, the proliferation of smart phones and the affordability of data plans, will eclipse this kind of revenue in the near future.

Text and banner ads are gradually losing power. Yet, text adds for a text service sounds like the the appropriate ad type.

Banners are largely ignored, especially by  a crowd so diverse as  microblogging users, which cannot be targeted easily. Text analysis tools, that can extract meaninful information (like one’s preferences, buying patterns, spending power, age etc), need to be developed.  Such tools  would also need to perform their analysis throughout various microblogging services, and target users throughout  the microblogging ‘federation’.

How much ad revenue can make a microblogging service break even? Not too much, given the low setup and zero development costs. Even so, will it be  generated? It better be or the ‘federation’  will go bankrupt.


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