The three business models that make Twitter a billion-dollar business in 12-24 months.

Allen wrote a blog post today about Twitter focusing on a business model. Allen, my friend, you’re thinking small. Get out of Brooklyn and spend more time in the Valley. Business models!?!?! The business model comes AFTER you get to scale.

When Twitter gets to scale here are the very obvious, and wildly lucrative, business models:

1. In feed advertising
Imagine if every 10th, 20th, or 100th tweet was an advertisement. Would that be so horrible? No, not at all. “your free Twitter account is brought to you by Apple’s iPhone” would be perfectly acceptable to users and advertisers on the web. These ads will get solid click through if targeted well…. also they could be display/visual ads that really “pop” off the page since Twitter pages are text based (as opposed to say Flickr where the graphical ads would compete with the photos).

2. SMS Advertising
Users would be perfectly fine if every 100-200 or so SMS Tweets they got an advertisement. If/when Twitter turns on SMS advertising they will have the largest independent inventory of SMS advertising in the world. You think Google or a carrier mighty be interested in that?

3. Subscriptions
I’ve been asking Ev to pay for a reliable Twitter professional service fro over a year. I would estimate 1-5% of Twitter users would pay for a professional version that had 99.9999% up time, as well as special features like file storage for MP3 files, photos and videos (i.e. like Pownce’s pro account). This might “only” be a ten to fifty million a year opportunity, so I wouldn’t focus on it.

Bottom line? Ev shouldn’t worry about a business model for another two years. Just build the service to *massive* critical mass. Get to 100M users–which is where the service is headed. If the service gets to 100M monthly users it will be worth a couple of billion.

That’s what I learned at AOL: Once you have critical mass you can’t help but make a fortune. An absolute idiot with 10-20M users can make a ton of money. So, get to tens of millions of users and forget about money.

Game over.

Done.

Running a startup is NOT about revenue anymore–it’s about critical mass. It’s about scale. When you’re playing in the big leagues with unlimited access to capital you shouldn’t worry about revenue BEFORE you have critical mass.*

* Note: if you’re not a player like Ev, and you don’t have unlimited access to capital do not take this advice and focus on building revenue streams.