- sharing money between users (like Facebook's gifts), selling badges to users (like Japan's Line), selling games (like Tencent ( TCEHY) or Facebook), selling stuff (like Amazon ( AMZN) or Alibaba), selling geolocation information to local commerce (like Groupon ( GRPN) is trying to morph into), or from getting a cut of electronic payments (like PayPal, or Square or Braintree is trying to do).
FB) within three years. It seems hard to believe when you first read that. Facebook is older, has always been bigger, appealed to more of a mainstream audience and had more revenue than Twitter. YHOO) of three years from now (with a really big user base but not a lot of top-line growth). At the same time, Twitter would have to dramatically change its future prospects. We would all have to see Twitter as something more than a news service.
It would have to morph into something like a new type of television service. We would read it for news and media (video and photos). We would follow people like we do channels. Twitter would be at the center of this. Beyond increased advertising revenue, though, if Twitter was going to make the leap to have a bigger market cap than Facebook, they would have to develop a new revenue stream from transactions or payments (while Facebook would have to fail at that). This payments or transactions business could come from:
All of these social networks will become much more powerful at knowing who we are and where we are and making offers to us that will be much more targeted. An advertisers or sellers will pay up big time to get in front of such a targeted audience. So, the final piece of the scenario in which Twitter outshines Facebook in three years from now in terms of market cap is if it turns out that Twitter knows not just a little but a lot more about its users than Facebook. If it turns out that the "interest graph" (i.e., what we care about) tells Twitter much more about its users than Facebook's "social graph," they should be able to monetize that much more powerfully. In this scenario, both advertisers and Wall Street will pay up for it big time. I don't think it has to be either or though between Facebook and Twitter. Both will become much smarter about their users than they are today and share that with advertisers. Both will go after the additional revenue streams that I mentioned above. Both should be rewarded by investors and advertisers. One thing is clear: The Twitter (or Facebook) we think we know today will be much smaller and more narrow compared to the Twitter (or Facebook) in three years from now. At the time of publication the author was long YHOO and GRPN. Follow @ericjackson This article was written by an independent contributor, separate from TheStreet's regular news coverage.