NEW YORK (AdAge.com) -- Thanks to Twitter, there has been a proliferation of URL shorteners in the past year. These condensing services, such as tinyurl, bit.ly and ow.ly, convert long website URLs to a short set of letters and numbers to help users squeeze under the 140-character limit.
That's all well and good for the Tweeters who use them. But what's the business model for the companies?
Many URL shorteners are privately held and backed by venture capitalists, and they seem to have another thing in common: Few, if any, look to be generating a lot of revenue.
Some make money by collecting fees for expanded services and features, others collect ad dollars with placements on their websites, and still others collect and sell data analytics to marketers. "Marketing folks love click stats, and tiny URLs create them in an elegant model," said James Governor, an analyst with RedMonk. "Instead of measuring how many people came to your site, you're measuring how many you sent to other web properties."
For the giants, generating revenue may be beside the point. Last year Google and Facebook launched goo.gl and fb.me, respectively, and Twitter plans to do the same. For them, a URL-shortening service is a relatively inexpensive feature that keeps users tied more firmly to the brand and gives the company access to data about what their users are reading and viewing and where they go online.
URL shorteners "give them even more data and makes them even smarter repositories of consumer information," said Heather Dougherty, research director at Hitwise. "It's useful for Google's search algorithm, and as Twitter and Facebook get more into paid services, it gives them even more data. (Those are) powerful analytics and data for marketers."
Providing, of course, they know what do with all that data.
Bit.ly, the biggest and most well-known independent URL shortener, has some ideas on that. Bit.ly Pro, launched in December, offers a free "dashboard" with analytics including total number of clicks, frequency of clicks and where they're coming from. But it also sells an enterprise version for $995 per month with more extensive analytics and features including custom domain names for marketers such as nyt.ms for The New York Times and a real-time feed of click data.
Privately held, Bit.ly is part of Betaworks, which also owns TweetDeck and Twitterfeed and counts Intel Capital, RRE Ventures and SoftBank as investors. Andrew Cohen, general manager of bit.ly, said it tracked more than 4.2 billion clicks on bit.ly links last month.
He believes one of the values of URL shorteners is that they address some of publishers' problems with social media. "Twitter and Facebook drive real traffic and real revenue. But ... what happens to your content once it leaves your site?
Is your branding getting left behind?" he said. "These are the kind of issues we're trying to address with our enterprise package. ... Take any New York Times article or any Amazon product page, for instance, and try to shorten it. Instead of a bit.ly link, you'll get back a branded link that tells you where you're going, like nyti.ms or amzn.to."
Hitwise tracks 38 URL-condensing services right now, said Ms. Dougherty, adding new ones as they pop onto the social-media scene. There are dozens of choices, and many of them rise and fall at a volatile rate.
Last week for instance, bit.ly accounted for 31% of all visits to the category, according to Hitwise data, followed by sup.er, tinyurl and ow.ly. However, for the five weeks before that, ow.ly dominated the category with 62% of the category traffic visiting that site. A new pop just last week was is.good, which grabbed a 9% traffic share for a 252% increase in its year-over-year traffic, Ms. Dougherty said.
"The traffic seems to depend mostly on what the topic is and what service they're using. Say Justin Bieber fans and 'American Idol' fans were all using ow.ly last month -- that would make it pop," she said, adding, "If someone with a lot of followers changes URL shorteners or a major news outlet switches, it would have a huge impact."
Ryan Holmes, CEO of venture-funded HootSuite, which owns ow.ly, believes a shakeout is coming. "Groups that have revenue and a business model will be left standing (ourselves and bit.ly)," he said in an e-mail. Ow.ly is planning to introduce a suite of enterprise paid services and an ow.ly pro service that "will allow users to bring their own vanity URLs," he said. Hootsuite recently got a $1.9 million cash infusion from Interactive Media, Blumberg Capital and prominent angel investors Social Concepts and Geoff Entress.
But smaller competitors believe they can carve a niche in the business. Ted Shroyer, co-founder of tinyarro.ws owner Miracle Labs, said factors such as low operating costs, a unique positioning (it offers signs such as hearts and arrows as part of the shrunken URL) and international potential play in his favor. "I think it's a long-tail phenomenon where people will find the URL shrinker they like and the tools they like and go with that one. I think there's plenty of room for lots of competition," he said. His company makes money charging yearly fees for custom-domain shrinking that helps marketers track specific campaigns and promotion.
Of course, marketers need to be aware of the capabilities of the URL-shortening service used. It would be disastrous to be left with nonconvertible and unusable piles of shortened links if a service goes out of business.
"Users should demand their URL shortener allow portability of analytic and URL mapping," said HootSuite's Mr. Holmes, noting, "for every service that goes under, we will happily re-map URLs if possible, through our service."