Bit.ly prides itself on the stability of its infrastructure. When you shorten a URL, the system stores data for the link in several different places across the Web, a level of redundancy that addresses Schachter's concerns about link rot—links created by the service won't go down anytime soon, Bit.ly says. Every time someone clicks on a squished URL, the link shortener's servers must translate it into a full address and redirect your browser to the new site. Bit.ly claims that its system for handling these requests is much more durable than those of other shorteners. In May, Twitter changed its Web site's default shortener from TinyURL to Bit.ly; as a result, Bit.ly saw its market share rise sharply. Now, according to Tweetmeme, more than 60 percent of the links on Twitter are shortened with Bit.ly. TinyURL has about 30 percent of the market, and every other shortener has less than 5 percent. The Bit.ly rep told me that the service now gets more than 150 million clicks on shortened links every week and that it can handle many more times that level of traffic.
How do you make money from hundreds of millions of clicks? One plan is to sell stats. At the moment, Bit.ly gives you real-time traffic data for every link you shorten. Ordinary people find this fun—you can immediately check to see how many people clicked on what you just sent out. For advertisers who are using Bit.ly to send out campaign messages, these real-time stats have monetary value. Companies have asked Bit.ly for much more detailed stats—the ability to test which specific slogan results in the most clicks, for instance. In the future, Bit.ly could make these in-depth stats available only to those companies willing to pay a subscription fee.
Another potential revenue source could be a content site. Because Bit.ly knows which videos, news articles, songs, and photos are getting linked to and clicked on across the Web, it can automatically spot trends before human-edited aggregation sites like the Huffington Post. It would feature all this stuff on a single site—and, of course, it would sell advertising on the page.
Bit.ly's grand plans all rest on a huge assumption—that ordinary Web addresses will remain long and that people will always need a way to shorten them. It's not clear that's the case. About half of Bit.ly's users shorten links just for Twitter, which—because it began mainly as a text-messaging service—imposes a limit of 140 characters per tweet. But as Schachter points out, Twitter no longer needs to stick to that limit, as few of its users continue to use text messaging as a means to tweet.
Not many people are calling for Twitter to drop the 140-character limit—many argue that imposing such a cap keeps Twitterers sharp. But what if Twitter simply stopped counting URLs toward the limit? This wouldn't impose much of a technical burden. It would also make Twitter much more user-friendly—people who read your Tweets would see meaningful Web addresses rather than cryptic strings. And it would make links more stable, removing an unnecessary middleman from the process.
Nobody knows what Twitter will do; the company may very well decide to let shorteners run free, and Bit.ly may yet see its fortune. Of course, that's what RealNames expected. Investors, beware.