The Twitter Business

News emerged yes­terday that Twitter is going to intro­duce advert­ising to its service. This will take the form of what it is calling ‘promoted tweets’ that will appear at the top of search results through the service in a con­tex­tual manner.

The New York Times reports on how they’ll work, saying:

Starbucks, for instance, often pub­lishes Twitter posts about its pro­mo­tions, like free pastries. But the messages quickly get lost in the thou­sands of posts from users who happen to mention meeting at Starbucks.

“When people are searching on Starbucks, what we really want to show them is that some­thing is hap­pening at Starbucks right now, and Promoted Tweets will give us a chance to do that,” said Chris Bruzzo, vice pres­ident of brand, content and online at Starbucks.

When a Twitter user searches for a word an advert­iser bought, the promoted message will show up at the top of the results, even if it was written much earlier. The posts say they are promoted by the company in small type, and when someone rolls over a promoted post with a cursor, it turns yellow.

According to Techcrunch, they’ll look like this:

You may be feeling somewhat under­whelmed by this news and won­dering what all the fuss is about. I can under­stand why. Twitter Search is only a small part of the service and the use-​​case of people both­ering to search for ‘Starbucks’ before they go for a coffee seems… shall we say… narrow.

On the other hand, people have been won­dering how Twitter will manage to pay its way for a long time. Last September, the company accepted $100mn in VC funding, with the total standing at $160mn. That’s a lot of money, espe­cially since, up till now, it only had one source of revenue – license money from allowing Google, Bing and Yahoo to index tweets.

Many of us believed that adverts were coming, though co-​​founder Biz Stone dis­missed the idea last May – a position he has clearly recon­sidered. Like a lot of Web 2.0-style sites, it has had no real problems with traffic since it started to hit the main­stream at the begin­ning of 2009: it records around 20mn unique visitors to twitter.com every month. Nor does it seem to have a lot of out­go­ings: no content pro­du­cers; not much in the way of mar­keting; text messages only, so low band­width costs-​​per-​​user (compared to, say, YouTube). For some reason, it has a whopping 140 employees – well, I suppose they had to do some­thing with all that money.

The move to advert­ising on Twitter is bound to upset some people: users who don’t like ads; twitter-​​advertising agencies like TweetUp (rather inaus­pi­ciously launched last week); social media agencies who’ve delved heavily into how to get links spread organ­ic­ally (what’s the point, if you can just pay for place­ment?) It may also be bad news for some of the 3rd party applic­a­tions developers. If you were Twitter, and you wanted people to see adverts, would you give third-​​parties free access to your search cap­ab­il­ities? I’m not sure I would. In moves that look a lot like an attempt to control users’ exper­i­ence of the service, the company has recently released its own Blackberry client, effect­ively burying rivals like Ubertwitter and Twixtreme. It bought the developers of the most popular iPhone client, Tweetie, last week. The makers of desktop Twitter clients like Tweetdeck must be in a strange place right now, waiting for either the rug to be pulled from under their feet or a very welcome phone call from Biz Stone.

I’d like to go back to the “users who don’t like ads” who may well be upset by this devel­op­ment, because I think it is sig­ni­ficant. Twitter is quite clearly nervous about this. In the New York Times story, the company says it will withdraw adverts that people don’t respond to:

Twitter will measure what it calls res­on­ance, which takes into account nine factors, including the number of people who saw the post, the number of people who replied to it or passed it on to their fol­lowers, and the number of people who clicked on links.

If a post does not reach a certain res­on­ance score, Twitter will no longer show it as a promoted post.

You can’t really imagine a tele­vi­sion company doing that, can you? There are a couple of reasons why. First, advert­ising on TV is an estab­lished practice, whereas Twitter is adding a layer of inter­rup­tion to a pre­vi­ously unblem­ished space. Second, TV is a broad­cast medium – we consume it – whereas Twitter is a com­mu­nic­a­tions platform – we make and interact with it. People don’t like or respond to advert­ising mixed with their com­mu­nic­a­tions. Look at the failure of Blyk, who offered free mobile phone calls in return for receiving adverts: people hated it so much that not even a free phone account was suf­fi­cient entice­ment. That’s why Twitter is not (yet) inserting paid place­ments into the message stream, only on the search results.

For me, then, advert­ising isn’t going to recoup $160mn – let alone an attractive exit for investors – very quickly: I’d suggest that charging for premium services would be a good start though. What sort of premium services? Well, maybe some­thing like

• Enhanced search – find the ori­gin­ators and the influ­en­tial passers-​​on of messages; sort by domain authority; sort by number of fol­lowers; sort by Klout.
• Charge for veri­fic­a­tion of accounts.
• Charge for brand-​​cleansing e.g. unof­fi­cial accounts; satir­ical accounts.
• Charge for SMS use: they don’t have a traffic problem, so why not?
• Enhanced tools for finding authorities.
• Management tools – find dropped fol­lowers; measure the impact of tweets.
• An ad-​​free version.
• Charge for better/​cooler-​​looking profile pages – more links; layout control; give users ability to place their own ads.

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