Q&A: Twitter’s retention rates: will Twitter be pervasive or a niche app?

After my TV interview about Twitter the other day, I’ve just been interviewed by ABC Radio about the Nielsen research just out that shows that Twitter’s second-month retention rates for new users are 40%, compared to retention rates of 50-60% for Facebook and MySpace when they were at a similar stage in their growth.

I was asked some interesting questions in the interview, so to paraphrase them and quickly respond:

Is this a concern for Twitter’s executives?

Absolutely. It’s one thing to get massive numbers of new users. It’s another thing to retain them. Unless Twitter can change this, it will never conquer the world as some suggest it might.

Why are new users dropping off so quickly?

Twitter is certainly not for everyone, and probably many of the people who try it don’t discover how it might be valuable to them. Yes there are two kinds of people: those who love Twitter and those who don’t get it, but it’s very likely that some of those who don’t see any value in it could be convinced if they had the right initial experiences.

Why would Twitter succeed when Facebook and other social networking tools do the same and so much more?

I just read an interview with Twitter co-founder Evan Williams in the book Founders at Work, done just before he started Twitter. His last words in the interview were “Simplicity is powerful.” The success of Twitter is a testament to the truth of this insight.

In light of these figures, has Twitter waited too long too monetize?

I don’t think so. Twitter is an all-or-nothing type of bet. Either it grows to challenge the likes of Google, or it remains niche. Monetizing early would have jeopardized their chances of transforming the planet. They still might not get there, but at least they have a crack at it.

How will Twitter make money?

That is (hopefully) the billion dollar question. Since I see the primary value of Twitter as an information filter, it absolutely makes sense that search – which is the foundation of Google’s success – will be a core part of that equation. There are many other opportunities including charging marketers and corporate for value-added services, but the lightest touch results in the highest value.

Will Twitter challenge the media giants?

Not in its current form. Twitter already is a key source of primary news for many. However it is far easier to make money from the second phase of news, which does require journalistic skills to check, contrast, present, and communicate effectively. The interplay between Twitter and similar true primary news sources and establishment media, which is skilled at the next phases of media creation and dissemination, will be fascinating to watch. I strongly doubt Twitter wants to play in that latter space.

Who will the winners be in social media – Twitter, Facebook, someone else?

It would foolhardy to pick winners now. The pace of change in front-running social media sites, from Friendster to MySpace to Facebook to Twitter (at least in terms of growth rates) is if anything accelerating. I’m certainly not prepared to say that Twitter will trump them all. However I am certain that the kinds of distributed conversations that Twitter enables will be a central part of our future as humans, whatever the platform that happens on.