How does Bit.ly make money?

Last week Bit.ly won $10 million in series B funding, and this week we’ll see how the URL shortening service aims to make a profit. More and more companies are in need of a way to share links on Twitter and other microblogging sites.

Bit.ly Pro is a paid-for service that allows large brands to create short URLs. They could create a custom-shortening tool, but this can take time and money. It’s much easier to just use a system that already offers the service.

Large brands including FourSquare, Yahoo and Pepsi already use Bit.ly Pro to create custom URLs for their websites: 4sq.com, yhoo.it and pep.si.

The standard Bit.ly product offers insights for links that both registered members and anonymous users create; but the Pro edition offers tracking for a whole domain.

If your company needs real-time analytics for unlimited links and a customisable dashboard you can have all of this for $995 per month. This sounds expensive but the service is reliable and easy to use, which is what a company needs so that all members of staff can use it.

They have also made the service seamlessly integrated with most Twitter applications including Tweetdeck, Twitterfeed and CoTweet.

This means every member of staff can tweet any page from the company’s website and it will appear with the custom-shortened URL.

Most people don’t care what is written after the first part of a domain. If a URL says Pepsi.com/something, most people will only read the Tweet followed by the domain. So why not have the domain say the brand’s name?

At nearly $1000 a month the service only needs 1000 companies to be a company that has a million dollars in revenue. Which must appeal to its new investors.

Bit.ly still provides most of its services for free. I wonder how much of its money goes towards maintaining servers to run the free requests and how much is profit going to the shareholders and staff. The tool is going to be around for a long time and there are no quick profits in sight. It looks like URL shortening investors need to be in it for the long haul.

[UPDATE]

Having been one of the movers and shakers of the last year or so it is time for an update on Bit.ly along with a few others in the field of URL shortening.

One of the reasons Bit.ly has been in the news is because of its connection to Libya, despite having no real ties with Libya Bit.ly uses the country’s web address suffix “.ly” in their top level domain name having purchased it for $75 in 2007. The company says this is purely to do with them liking the name “Bitly” and the simplicity of the short web address and nothing to do with Libya. To be able to use a country code a site needs to have at least two servers in that country, however, Bit.ly experienced no problems during the recent conflict within Libya as only two out of their five root servers are based there.

The fortunes of the two companies headed in opposite directions when Bit.ly ousted TinyURL as the default URL shortening service on Twitter in mid 2009 despite TinyURL having a far greater slice of the URL shortening pie at the time. Since then it is clear from their websites alone how each is faring. There were three main reasons for this change; the significant funding Bit.ly received just prior to the switch, Bit.ly investors who were also early Twitter investors, far superior back-end analytics and tracking tools, and links being a crucial 5 characters shorter i.e. http://TinyURL.com vs http://Bit.ly. Many other URL shortening services either cut their losses straight away or soon after realised they could not compete with Bit.ly now it had an official relationship with Twitter. However, the war was not yet won.

Perhaps the biggest rival to Bit.ly is Google’s service Goo.gl. It would be easy to assume that Google, being the behemoth that it is, would just bulldozer its own URL shortener into the number one spot with relative ease. They have the tools, the audience and the will to do so but it may not be plain sailing; the problem standing in the way of another Google monopoly is the aforementioned relationship between Bit.ly and Twitter. Given that Twitter is by far and away the number one destination for shortened URLs and Bit.ly’s position as the default shortener is solid, it would seem Goo.gl will struggle if it can’t find a way into the Twitter market. In spite of this desperate need it seems highly unlikely Google will find an official way into Twitter given that relationship between Google and Twitter was already stretched even before Google became a direct competitor in the social networking sphere with the release of Google+.

Both Bit.ly and Goo.gl have browser extensions and both provide decent back-end analytics, so it could well come down to Google’s almighty power innovation VS Bit.ly’s exploitation of their Twitter alliance.