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Innovation Economy

Start-ups flock to Twitter, looking to capitalize on network’s growth

By Scott Kirsner
Globe Columnist / October 4, 2009

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The central topic of conversation over the past few weeks, when two or more tech types gather in the same place, has been whether Twitter is in fact worth $1 billion, and what the company might eventually do to generate revenue.

Though it is now three years old, the Internet messaging service still hasn’t revealed the particulars of its business plan. But that didn’t stop several investors, including Boston-based Spark Capital, from funneling another $100 million into Twitter last month, setting the San Francisco company’s value at $1 billion, at least on paper.

In our neighborhood, more than half a dozen companies offer applications and services connected to Twitter - and some of them, unlike Twitter itself, are already starting to bring in actual money from customers. (What an old-school notion!) Call them Twitter remoras - companies attached to Twitter like remora fish attached to a shark.

“Twitter, to me, is kind of like the phone company,’’ says Mike Langford, founder of Westborough-based Tweetworks LLC. “They’re building this great infrastructure. I think there are tons of opportunities for them to make money, and just like there is a lot of stuff built on the infrastructure of the phone system, I think you’ll see profitable companies built on Twitter.’’

Tweetworks aims to make conversations on Twitter a bit more organized. Its service, offered at no charge, helps organize Twitter messages, often called “tweets,’’ into clusters around a particular topic so they are easier to follow.

Tweetworks users can also create their own groups of people interested in a topic. Tweetworks doesn’t generate revenue yet, but Langford expects that customers who want certain features, like maintaining private groups or getting statistics about group activity, may pay a monthly fee to use it, or that advertisers will want their online campaigns targeted to groups of Twitter users interested in, say, home improvement and interior design.

The companies that seem to be gaining the most momentum are those that offer some sort of Twitter measurement service.

Cambridge-based HubSpot Inc. offers a free service called Twitter Grader, which analyzes how well a Twitter account is performing in terms of attracting followers and supplying them with content that they’re likely to pass along (or “re-tweet’’) to other users.

Twitter Grader is used tens of thousands of times every day, according to HubSpot cofounder Dharmesh Shah, and the free service helps attract paying customers to HubSpot, which sells online marketing software that starts at $250 a month.

Crimson Hexagon, a Harvard spin-out, helps companies analyze what consumers are saying about their products across all sorts of online forums, like blogs, discussion groups, and Twitter. But “a fair number of our customers these days are interested only in Twitter,’’ says chief executive Candace Fleming. “We can summarize for them the opinions that are being expressed across thousands of tweets on a particular topic, like what people like or don’t like about Bing,’’ Microsoft’s new search engine. A typical client project that Crimson Hexagon works on, Fleming says, generates fees in the tens of thousands of dollars. The company raised about $1 million in new financing in August.

Boston-based Traackr also sells analysis of what’s happening on Twitter to it clients. Traackr generates lists of influential users of Twitter and other social networking services; marketers may be interested in reaching out to these “influencers’’ to get them to test out a new website or sample a product. Clients pay Traackr based on the size of the list it generates, anywhere from $1,500 to $15,000 or more.

GraphEdge is a service that creates a report to track trends among a Twitter user’s audience, like how quickly it is growing or shrinking. Created by Waldron Faulkner, GraphEdge is currently free, but Faulkner has plans to implement subscriptions soon for Twitter users with large numbers of followers.

Oneforty is one of the newest local Twitter-related start-ups. It aims to provide a directory of the best (and worst) Twitter applications, like software that allows you to post messages from your mobile phone. Since some of these applications cost money, Oneforty’s business plan involves a small referral fee when it facilitates a transaction. Founder Laura Fitton has raised several hundred thousand dollars so far from angel investors.

Among the Twitter remoras, there’s only a hint of worry that as Twitter grows and searches for sources of revenue, it may start duplicating what they’re doing, suddenly becoming a very big competitor. The crew at Thoughtbot, a Boston-based software development firm, built a site called PoliTweets last year, to collect what Twitter users were saying about the presidential race. Twitter mimicked that several months later with a site called Election.Twitter.com.

“There’s obviously a risk when you’re building any of these apps that Twitter will do it for themselves,’’ says Dan Croak of Thoughtbot, which has built two other Twitter services, Pockets and Thunder Thimble.

But most of the small companies don’t worry much about Twitter’s long-term viability. The service has simply gotten too popular too quickly, they say, for it to vanish. “I’m sure they must have some amazing plans for revenue,’’ says Fleming at Crimson Hexagon.

Two more Twitter-linked entities locally are Spark Capital and Charles River Ventures in Waltham.

Any eventual success or failure won’t have a big impact on Charles River, which has only about $250,000 invested in Twitter. (Twitter has raised $155 million in total.) Charles River participated in Twitter’s first round of funding in 2007, but wasn’t the lead investor - even back then, Charles River’s partners thought Twitter’s founders had too lofty a valuation in mind.

But Twitter could be a reputation-making - or tarnishing - investment for Spark Capital, a relatively young firm. Partner Bijan Sabet sits on Twitter’s board and is an avid Twitter user. Spark took a hit earlier this year when another portfolio company, Verified Identity Pass Inc., which operated the Clear system for frequent fliers, abruptly shut down; Spark had led a $44 million funding round for the company just 10 months earlier.

Whether Twitter matures into an independent, publicly traded company, or is acquired for an eye-popping sum by a tech giant like Google or Microsoft, a success will vindicate Spark - and tweak, just a little bit, their doubting rivals at Charles River.

Langford, the founder of Tweetworks, says he has been trying to get an audience with Sabet at Spark to see if the firm might invest in his nascent business. But other local venture capital firms have been lukewarm. “You talk to some of the investors around here,’’ he says, “and they can’t understand the value of Twitter at all. They say, ‘We’re not sure how Twitter is going to make it, so how are you going to make it?’ ’’

Those are two big question marks in the Twitter ecosystem right now, though some of the Twitter remoras seem to be answering the revenue question more quickly than Twitter itself.

Scott Kirsner can be reached at kirsner@pobox.com.

All atwitter
Several local companies building businesses around Twitter

ONEFORTY
A directory of software applications and services that work with Twitter; will help direct new users and paying customers to them in exchange for a referral fee.

THOUGHTBOT
Thunder Thimble helps companies track what Twitter users are saying about their brands. Subscription fees start at $9 per month.

TWEETWORKS
Helps users interested in a topic create groups on Twitter and track strings of messages on a particular topic. No revenue model yet, but advertising and a monthly fee are two possibilities.

CRIMSON HEXAGON
Aids companies in tracking conversations about their products on Twitter (as well as blogs and online forums). Typical projects are in the tens of thousands of dollars, according to chief executive Candace Fleming.

GRAPHEDGE
Helps Twitter users understand trends among their “followers.’’ May soon start charging a monthly fee for Twitter users with large numbers of followers.