Media: All About ... Twitter's advertising model

Plans are afoot to monetise the social network, Anne Cassidy writes.

The first-ever Tweet was laughably understated. Four years ago, at the site's inception, the Twitter co-founder Jack Dorsey posted: "Just setting up on my twttr." It's a bit like saying "Just dusting off my nuclear detonator", when you consider the impact Twitter has had on the social, political and media landscape.

Twitter helped America's first black president to office and allowed oppressed Iranians to communicate with the outside world. But it hasn't been all good - endless banal gibbering from people who are alone in finding themselves fascinating is an unfortunate by-product. Nonetheless, the social networking phenomenon is enjoying seemingly limitless success.

Yet, until now, serious money-making hasn't been on the agenda. Its founders, Biz Stone and Dorsey, have seemed in no rush to monetise the site, preferring to grow the company before turning it into a cash cow. So, the arrival last week of a Twitter ad platform was long-awaited news for advertisers.

Twitter isn't the only hugely popular online brand to make its first foray into ads recently. Apple announced it is launching a new mobile advertising platform, iAd, giving mobile advertising a much-needed new and creative format. Entering the commercial world in such a way marks a shift in cultures at both companies.

The Twitter offering has always appeared straightforward and the company maintains that the site is whatever users make of it. Some form of backlash from consumers is inevitable but not necessarily damaging, MediaCom Beyond Advertising's managing partner, Stefan Bardega, maintains.

He says: "It depends on how intrusive the advertising is. There will always be a small group who won't want it, but most Twitter users will accept it as a reality of business that you have to generate money."

However, with its vast stash of data that could identify users, including addresses, Apple may face more of a battle from privacy groups.

The Twitter "promoted Tweets" ad system echoes Google's AdWords, with paid-for Tweets appearing when people visit the search engine on the site. The ads appear on the top of Twitter search pages and, though clearly labelled as promoted, they'll resemble an ordinary Tweet. But advertisers can't just Tweet any old rubbish. Ads that users ignore or don't interact with will be removed.

Twitter's search engine is not visited by many users, so Twitter can test out the new platform relatively unobtrusively. In time, though, ads will also appear on the site's homepage, but they will be relevant to the user's interests, as indicated by the messages they send and receive. Twitter also plans to mix promoted Tweets with users' own feed of updates later this year.

1Twitter has signed Starbucks, Sony Pictures, Red Bull, Bravo and Virgin America to advertise on the site. Virgin is posting "promoted Tweets" on flight deals to engage with users in real-time.

2Before the dawn of its ad platform, brands used Twitter as a relationship management tool, with varying degrees of success. Uptake in the UK has been minimal, though there has been success such as Comparethemarket's Aleksandr. In the US, Dell used Twitter to promote sales on Dell.com, which helped it generate an additional $6.5 million in sales.

3Twitter may be a virgin in the advertising world but its owners are not without commercial nous. In October last year, Twitter allowed Google and Microsoft to feature real-time Tweets in their search results in a deal reckoned to be worth more than $10 million annually.

4The site has recently taken a stronger approach to spreading its brand across platforms. Earlier this month, Twitter announced it was buying Tweetie, one of the most popular applications for accessing Twitter on the iPhone, and that it would be producing a version for the iPad.

5The number of visitors to Twitter has risen from 9.3 million in March last year to 22.3 million this March, according to comScore (this figure does not include people who access it through third-party systems). Stone told the audience at Twitter's first development conference, Chirp, last week that Twitter has 105 million registered users, though he didn't say how many of those were active users. Twitter has been valued at $1 billion based on the venture capital funding it has received.

What it means for ...

Twitter

- Finally, the micro-blogging site can make some serious money, which it can then reinvest in Twitter's development. By putting the platform in place gradually and testing it through the search engine, it can instantly gauge user reaction and have more chance of avoiding a major backlash.

- This changes its culture somewhat and will tick off some Twitterers. But as long as the ads are unobtrusive, it's a much more palatable alternative to charging users to access the service.

- In terms of providing ad solutions, Twitter is a novice. The company is clearly taking advice from those with an intimate knowledge of Google AdWords. But Twitter is a different offering and warrants its own unique ad platform.

Advertisers

- Twitter offers a direct response platform for advertisers. Brands will be able to promote offers and drive people in-store in a real-time environment you simply can't get anywhere else. Brands will get an instant reaction from people. Ads that are ignored are removed, so marketers will know very quickly if they are getting it right.

- Twitter will not suit all advertisers and lessons should be learned from Nestle's experience on Facebook. The food giant's online image took a severe dent when its Facebook page was inundated with accusations of unethical practices.

- Twitter's search engine is small and needs more development. It does not have the algorithms of a Google or a Bing. The challenge for brands in the early stages of testing the Twitter platform will be relevancy.

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