How much is a free customer really worth?
Twitter today reported on its blog a “significant” round of VC funding led by T Rowe Price. (There were some 400 news reports citing it as of this writing.) Interestingly, Twitter has yet to define a plan to generate revenue, let alone profits.
A Bloomberg article cited the problem: we’re ten years removed from the first internet bubble, and Twitter pulls a $1B valuation despite no revenue or profits.
I know 25 million users in August is impressive. But so is the culture of free that Twitter leveraged to build that audience. Which raises the title question “How much is a free customer really worth?”
Customer loyalty is a response to the relationship between what you say to your customers, what you actually do, and how they perceive the end result. When free isn’t the price anymore and price-based value comes into question at Twitter, how will customer perception change?
Part of what makes Twitter authentic to its user base is the social connotation of the price point. “Free and useful” on the internet doesn’t mean the same thing as “free”. It suggests an anti-bureaucracy, anti-commercial viewpoint that resonates with the internet populus and may drive traffic.
When free becomes fee at Twitter, either the brand promise becomes something entirely new to remain authentic, or it struggles to reconcile its mixed message.
Twitter smartly got 300 million users on its bus. It’ll be interesting to see how many are willing to pay a fare with so many other options available.
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