Today’s New York Times has an interesting article titled Start-Ups Test Dot-Com Business Models, which compares the business models of Twitter and Yammer (a recent start-up focusing on business micro-blogging that I wrote about in a recent review of the space).
It says that Yammer, while a tiny fraction of the size of Twitter, is already getting revenue, while Twitter is still focusing on growth and waiting to monetize.
His focus on profits helped Yammer, which is based in West Hollywood, Calif., win the TechCrunch50 prize for start-ups in September. TechCrunch, a leading technology news blog that sponsored the contest, called the company “Twitter with a business model.”
Yammer’s business model is compelling, Mr. Sacks said, 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 Yammer’s first six weeks, 10,000 companies with 60,000 users signed up, though only 200 companies with 4,000 users are paying so far.
Clearly Yammer will need a dramatic increase in uptake for this to be a solid business model, however given it has achieved these figures in the first six weeks, the momentum is on track so far.
Apparently Twitter is looking at tapping the business market soon, though not necessarily for use inside the enterprise.
Early next year, Twitter plans to introduce several ways to bring in revenue. One idea is to charge companies that want to use Twitter as an official channel to talk with their customers and monitor what they are saying.
Yammer’s per user business model certainly makes sense for companies that want to use these kinds of tools, as developing a similar service internally would be far more expensive and time-consuming. It hopefully isn’t too hard to justify $1 per month for incremental productivity and collaboration (if you believe that micro-blogging increases productivity )
This reminds me of the pricing model for Workbook, Worklight’s application for providing secure, authenticated enterprise-only interaction and functionality within Facebook that I wrote about last year. This is priced at a starting point of $10 per user per month.
These per user per month pricing models for externally hosted software, with effectively no implementation costs, make the business case for social software increasingly straightforward. Is the incremental productivity higher than the cost? Simplicity of implementation and reasonable pricing will see more companies try social software tools to find out whether it is.