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What Twitter Needs to Do to Survive (UPDATED)

**Updated on Page Two to include response and thoughts, via Twitter, from author, marketer and American Apparel (APP) Director of Marketing, Ryan Holiday. 

NEW YORK (TheStreet) -- Here's Twitter's (TWTR - Get Report) business model in the shell of a nut: We charge "advertisers" for crap we used to "give away" for free.

If you're an advertiser, you're insane to go along with this hocus pocus. If you do, you're lazy, unimaginative and blowing your company's money.

If you're an investor, you have already paid the price if you got long TWTR at the wrong time, which, unless you're a decent day or swing trader, is anytime since the end of last year. Stick with Facebook (FB); they're the pioneers of the buy advertising from us that you really don't need to buy business model.

Dick Costolo's Reed Hastings-like hold over the media can only take him so far. His act as social media's cerebral CEO borders on stand-up, a profession he should consider making his day job again. Because what he's doing now isn't going to work. I'm not going for a play on words here, but it's truly a house of cards that's more unstable than the one Hastings floats at Netflix (NFLX).

Must Read: Yelp's Upcoming Earnings Unlikely to Undo Twitter Damage

Two key points then I'll shut up, but you can rant at me and I'll respond by raving on -- of all places -- my Twitter feed with a new name!

First, what advertiser in their right mind assigns value to what Twitter purports to do for them?

I know a guy who ran social media for a major celebrity. This person had a sick budget to spend on Facebook advertising. And we both knew that spending it was akin to throwing money into a urinal at pre-remodel Dodger Stadium. This star is so big that all he/she has to do is pass gas on social media and it finds a way to go viral. Why spend money on something you can make happen for free?

Twitter's essentially telling advertisers We had no idea that Twitter would become this thing people second screen with. That has happened so the stuff you used to be able to do for free -- and can, to some extent, still do for free -- well, we're going to ask you to pay for it via the same old tired systems everybody else has in place ... ad exchanges, "integrated bidding systems" and such.

So Twitter assumes this position of authority and expertise over an area it never even visioned emerging. It has emerged and now Twitter believes it's uniquely qualified to tell brands how to spend money to maximize what amounts to the sharing of their content and positioning of their message.

Put your faith in Dick Costolo and team. They have helped gentrify San Francisco. They're smarter than you.

There's no reason why people and entities -- from major brands to upstart companies and individuals -- can't leverage social media for free, next to nothing or (if they have them) with resources to build out and execute their own platforms. If I'm in charge of marketing I'd rather spend my money picking Ryan Holiday's brain over giving a dime to Twitter, a company that unknowingly watched a business opportunity that's barely a step above medical pot and e-cigarettes fall into its lap.

Second, the media loves Twitter. And for good reason. It's a valuable tool people such as myself use -- 24/7 -- for free to consume news and information as well as spread it. Not to mention shamelessly self-promote our own "brands." As nauseating as that feels sometimes, it's likely here to stay. And that's probably a good thing because Twitter makes every medium better from pretty much every perspective -- be it the personality, the journalist or the viewer/listener/reader.

But Twitter isn't somehow entitled to build a business on this simply because previous platforms turned similar phenomenons into businesses (that continue to sustain).

Twitter should drop the act and do one of two things -- ask Google (GOOG) or even (AMZN) to buy it. Both companies could modestly leverage Twitter to promote their core interests. And they would be fine stewards of the Twitter craze. They would treat it like the non-profit it is.

That's likely favorable to Dick Costolo and his cronies. Under this model, they stand to get richer and assume positions inside Google or Amazon that allow them to maintain fancy titles and make even more (free) money on the backs of copious amounts of stock options. A fantasy world akin to 1980s backstage cocaine parties could continue without hindrance. (TWTR lockup expires soon so get this party started quickly).

But even more favorable to the rest of us -- the Wikipedia model.

Run Twitter by asking for donations. Create the The Twitter Foundation or some such and allow it to act as the conduit for Twitter and whatever else that entity owns and/or aspires to do. If you -- as an individual or larger donor (company, charitable giver) -- love Twitter, see value in it and want to see it survive as a purveyor of news, information and general shenanigans, you donate money to the cause to keep it throbbing and growing.

If the people at Twitter actually want to see it endure, serve its loyal users and make a difference in the world from the mundane to the seriously sociopolitical, that's will they'll do. If not, they'll stay the course by selling their souls in what will go down as futile attempt to build a farce of an advertising business.

After the click to Page Two, Holiday comments on part of my take ...

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