Jack Dorsey: Twitter's business model based on 'serendipity'

The creator of Twitter (and CEO of Square) says the microblogging site's ad model shows big promise.

Jack Dorsey James Martin for CNET

TUSCON, Ariz.--It's not the kind of business model one expects to hear from a startup, especially one now valued by the private markets at $8 billion.

But when Jack Dorsey, the creator and executive chairman of Twitter, was asked about Twitter's business model, he said it was hardly thought out.

"The business model is focused around serendipity," said Dorsey, who spoke with moderator David Kirkpatrick on Sunday at Techonomy 2011.

It's hard to imagine that answer will silence the Twitter skeptics.

Twitter, for now, is about growth and, according to Dorsey, engagement. While growth is obvious--after just five years in business, Twitter is now handling 250 billion Tweets every day --the engagement seems less so.

Dorsey, who splits his time between Twitter and Square, where he is co-founder and CEO, said that Twitter's ad products--promoted trends, promoted accounts, and promoted Tweets--get engagement rates between 1 percent and 5 percent.

Dorsey compared it with the early days of Google AdWords, referring to the text ads that appear alongside search results.

"When AdWords came out, people resisted," he said. Now, he argues, that people believe that the ads make the search experience better. Dorsey said he doesn't even think of Twitter's promoted products as ads "in the traditional sense."

"It's how we introduce you to something new," he said. "Something that might be hard to find but that you have an interest in."

That sounds like the sort of talk any advertiser would use justify ads that people might or might not want. Twitter, however, is till new territory for advertisers, and the company is moving carefully with altering the experience.

"The user experience is what matters," said Dorsey. "If the user experience is bad, then we fail."

 

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