Some interesting insights coming from Michael Arrington over at TechCrunch today, discussing what he refers to as “The Revenue Dilemma” for internet start-ups like Twitter, that innovate and suddenly dominate an emerging market. Though we often joke about wildly popular companies that lack any means of generating cash flow, the paradox that these businesses often face is that the speculation of what they’re worth far exceeds the reality. Which is to say, once they do start charging for their services, building ad networks and so forth, suddenly page views and users start to mean something concrete. This possible fluctuation in valuation (if you’re thinking about selling), therefore makes the decision to implement revenue streams a bit trickier.

But that’s not to say that waiting is necessarily a bad thing either. If you believe enough in your model, then owning that space has the potential to pay off in the long run, just look at Google. Besides under or overvaluing a company, that speculation, while it might not generate revenues, can grow interest and keeping the platform free for long enough, can build your audience. Important considerations for the long term sustainability.

In the case of Twitter, while they have certainly risen to the level of a phenomenon, one has to wonder how much longer they can prop up their service on top of a foundation that’s shaky at best, before it topples under the collective weight of its user traffic without monetizing the service. Bigger question is, do they have a revenue plan that they are prepared to execute on?

[image via dandeluca]