CEO Dick Costolo famously said that Twitter is not a media company about six weeks ago at the AllThingsD conference.

To be fair, Costolo said that Twitter isn’t a media company but is “in the media business”.  To some that may be a distinction without a difference.  Costolo clearly wants to position Twitter as a complementary part of the media ecosystem (which it is by and large) rather than a competitor, and there remains a chance that Twitter will have other forms of revenue besides ads.

Like many in the tech startup ecosystem, I’ve been intrigued with Twitter as a business for years.  But frankly I can’t see Twitter as anything but a media company.  Here’s why:

1. Virtually all of Twitter’s revenue comes from advertising.  The rumors and estimates vary, but the most widely cited for 2011 was eMarketer’s guesstimate of $140M.  And Twitter CRO Adam Bain is focused primarily on growing this advertising base.
2. Most mass market usage of Twitter is by and for the media and celebrities.  Those of us in the tech ecosystem think of and use Twitter in slightly different ways, but the mass market usage of the product is consumers seeking exposure to news, celebrities, and sports stars.  In this sense Twitter’s real-time content is truly unparalleled in terms of not only reach but also depth.  But all the peaks in usage occur during sporting events, celebrity awards shows, and breaking news.
3. Twitter’s data is valuable primarily for advertising.  But what about Twitter as a “data” business not an ad-based one?  Twitter’s data could be valuable, which is why the company’s earliest revenue came from data licensing deals with Google and Microsoft.  But that data is valuable mainly as a way to better target existing forms of advertising (display and search) or to enable advertisers to increase exposure or better target Twitter’s new types of ad units like sponsored tweets and trends.  So even if Twitter’s data revenue were somehow to eclipse its own ad business, it will most likely be as an enabler of other ad-based models.
4. Twitter is unlikely to ever have a true commerce business.  There are lots of celebrities leveraging Twitter to sell their own products or establish e-commerce curation businesses.  That’s why companies like Beachmint are raising big rounds and why the Kardashians’ can sell millions of dollars worth of branded perfume, apparel, and jewelry.  And established companies like Dell and others use their Twitter accounts to drive e-commerce revenue.  Twitter itself can undoubtedly generate ad revenue to increase the e-commerce of other businesses, just as Google does.  But I’m highly doubtful Twitter will ever have a good opportunity to directly (as a seller of physical or digital goods) or indirectly (as a marketplace or hosted storefront) be a commerce business itself.
5. Twitter has ceded the premium service business to others.  While Twitter has acquired various client apps like TweetDeck, they let various 3rd party developers pursue the premium service revenue opportunity.  It’s highly unlikely Twitter’s product would support a premium service business for consumers (a la Dropbox, LinkedIn, NYT, etc) but there’s clearly an opportunity for businesses and marketers (e.g. Hootsuite, CoTweet, etc).  It’s probably not a huge market though.
6. Twitter isn’t really a social network.  The popular press frequently lumps Facebook and Twitter together, and in my mind both are essentially media companies.  But Twitter isn’t really a social network.  The “follow” modality is an interesting one and Twitter was a pioneer here where many others have now followed (sorry, no pun intended).  But it’s not the same thing as a social graph, and furthermore it’s not a platform in the same way Facebook is.  Compared on typical media metrics of reach and engagement, Facebook stands apart which is why it’s both much larger as a business (30-40X bigger in revenue) and a far more valuable company.
7. Even a filter for content can be a media company.  Dick Costolo rightly boasts that Twitter is one of the largest referrers of traffic on the web.  A huge percentage of tweets contain links to other content, and consumers undoubtedly look to Twitter as both a source of content and as a filter or discovery tool for other content. But that doesn’t mean Twitter isn’t a media company.  We don’t think of it this way, but for most of the last century Reader’s Digest was essentially a filter for the traditional print media industry by condensing or rewriting articles that appeared in other publications.  At its peak it became the most widely read magazine in the US and generated billions in annual revenue, before its circulation ultimately waned and the company went through reorganization by a private equity firm and ultimate bankruptcy.  But it’s hard to dispute that Reader’s Digest was anything but a media company.

In all fairness to Twitter, they’ve build a remarkable product and may be on their way to building a remarkable business.  As a source of real-time content and information, Twitter really has no peer in most global markets (China being the most notable exception where local clones dominate).  In the private markets Twitter commands a higher revenue multiple all the other high profile Web 2.0 companies (Facebook, Zynga, Groupon, LinkedIn, etc).

But it puzzles me when companies publicly and vociferously deny how most of the rest of the world views them.  Google and Facebook are very different companies than Time Warner, but at their core they all provide content and information to consumers and monetize that engagement with advertising.  They’re media companies.  I wonder if Twitter, as a business, will be able to fulfill its significant potential if it doesn’t embrace its true nature.