The cost of Twitter downtime

When Twitter went down on June 21 -- and again today -- a fissure opened in the fabric of the digital universe, but life went on. For those few hours, most of the 500 million or so people who use Twitter paused and briefly discussed life without Twitter with their friends and colleagues. They may have posted some comments on Facebook to pass the time, but they found ways to fill the empty space left by Twitter with other activities.

For publishers, marketers, and self-promoters, however, Twitter downtime translates into financial loss, especially for those who use Twitter's promoted tweets to tout their businesses and products. The private company is expected to generate about $300 million in revenue this year via its advertising efforts.

Tweets carrying various payloads -- links that lead to commerce, from pages loaded with ads to teasers for NBC's Olympics coverage -- are stuck in limbo, with no hope of reaching viral escape velocity. Companies dependent on using Twitter's API and social graph are also shut down. If Twitter were to offer a fee-based service for power users, such as those with hundreds of thousands or millions of followers, the outcry would be far less muted.

VentureBeat asked Ray Wang of Constellation Research for a back-of-the-envelope estimate of what Twitter downtime costs. Wang came up with as much as $25 million-per-minute, based on 25 percent of 100 million Twitter users in a business setting making $125,000 per year, a loss of $1 per minute-per-person. His cost estimate is exaggerated, but basically when tweets are not flowing, less cash is flowing back into the system.

After today's Twitter outage, the site's users may be less tolerant of the service's unreliability. It's unclear what they can do about it, other than complain and get rebates for the downtime, given that Twitter doesn't have serious competition as yet and continues to grow its user base and brand.

Twitter CEO Dick Costolo tells his employees, "We need to narrow the gap between awareness of Twitter and engagement of Twitter."

With Twitter outages making the news, more people get the impression that the social-messaging service is prone to failure and designed more for the digital pioneer than the digital tenderfoot. If Twitter wants to be more mainstream, reach a billion users in the next year or so, and reap the financial rewards, Costolo and team will need to close the unreliability gap.