Facebook, Twitter and the Legion of Freeloaders

Just for a moment, let’s put aside the management philosophies, growth strategies, corporate positioning, and equity and debt structures. When it comes down to it, success and longevity in business is kindergarten simple: your revenue must consistently exceed your expenses.

If it doesn’t, the day will eventually come when you run out of money. In corporate speak this is referred to as a liquidity crisis.

Auto makers like GM and Chrysler are current examples, as are retailers such as Circuit City and Linens n’ Things. However, at least these companies generate revenue. It may not be enough, but they have customers who write checks or slap down credit cards.

We can’t say the same thing for Web 2.0 darlings Facebook and Twitter. Each has become an integral part of my life and provide me (and millions others) with measurable professional and personal value.

Yet, every time either of these companies whisper about establishing a revenue-generating business model their respective users threaten revolt. (Notice that I referred to us as users, rather than customers.)

For instance, earlier this month Twitter co-founder Biz Stone hinted that the company is evaluating whether to charge corporate users of the service. Stone cited Dell as a prime candidate, referencing the $1M in sales the computer maker reportedly generated from Twitter during the holiday season.

The resulting cry of shock and outrage by inhabitants of Twitterville forced the company to quickly backpedal.

Big…big…mistake. I want to know when management at Facebook and Twitter are going to stand up to the legion of freeloaders that use their service. Advertising revenue alone is simply not going to be enough. These companies need to develop multiple sources of revenue and that means converting users into customers by making them pay.

If some don’t like it and turn their back on the company, then so be it. There will be enough of us who are willing to fork over some dollars because Facebook and Twitter make our lives better.

Right now, it’s the private equity investors who are covering the tab for all of us. One of these days the VC gravy train is going to end.