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Benefiting from Twitter’s Ads

Twitter always had a strange business plan. In fact, it doesn’t seem to have had any business plan or development plan, let alone revenue model at all. The service was created after a brainstorming session when Odeo workers Biz Stone, Even Williams and Jack Dorsey found themselves lacking passion about the service they working on. The infrastructure was built in two weeks and used initially as an internal messaging system before exploding at the 2007 SxSW festival.

Throughout Twitter’s growth since then, the policy has always been to build and watch what happens. The initial idea might have been Jack Dorsey’s but the way the service works in practice has been the result of users reinventing it, figuring out strategies and deciding the sorts of messages that help to build their communities, gather followers, and — if they’re commercial users — push their brand. From hashtag chats, in which twitterers can discuss a topic in real time, to Twitter’s giant suite of third party add-ons, much of the way that Twitter is used has been created by twitterers themselves. When an idea has come from within Twitter and delivered from the top down, such as lists, users have often reacted by questioning its purpose — and ignoring it. Twitter might well be the first genuinely crowdsourced social media site.

That makes introducing a revenue model all the more difficult. Unlike add-ons that allow for multiple account management, hashtag chatting and keyword alerts, developers aren’t going to create a system that allows Twitter to make money. Biz Stone and Evan Williams have to do that themselves — and hope that users like it.

Twitter Handles 600 Million Search Queries a Day

The launch of ads in search results then, announced a couple of weeks ago, marks a difficult moment for the company as it tries to figure out how to make money from the 55 million tweets that pass through the system every day. Users may understand that Twitter needs to generate income but there’s no way of knowing how they’ll react to sponsored tweets appearing at the top of search results.

Twitter has done its best to increase the chances that users won’t find the ads intrusive. The messages have to be natural tweets that are part of Twitter’s ecosystem, they  have to show interaction if they’re to continue to appear, and they’re currently only being served by a handful of selected brands. Those limits may help Twitter’s community to accept the presence of ads on the site without finding them too commercial.

Most interesting though is the fact that the ads are currently only served in search results.

According to an announcement made at Chirp, the Twitter developers conference held in mid-April, Twitter’s search engine conducts some 600 million search queries every day. That’s a remarkable number that, if true, would place Twitter second only to Google as the Web’s most popular search engine. Yahoo, in third place, generates around 9.4 billion searches every month to Twitter’s 19 billion.

And yet, Twitter’s search engine is weak, difficult to use and not a natural place to find information on any topic. Danny Sullivan of SearchEngineLand dug a little deeper and found that those search queries aren’t the same as the type generated on Google or Yahoo. Most, he discovered, took the form of automated alerts and widgets placed in Web pages whose API calls are recorded as search queries. The percentage of searches actually conducted by users through Twitter’s search engine — where the ads will show — is in the “low double-digits.”

Looking for Britney Spears on Twitter

And when people do search on Twitter, the kinds of searches they’re conducting aren’t the type that are most likely to attract advertisers. In April 2009, Hitwise found the most popular topic looked for on Twitter was entertainment, which made up 29 percent of the top 75 searches. It’s no surprise that “Starbucks” and “Virgin America,” two of the keyword phrases that now generate ads, showed no sign of making the top 75 that month (or apparently any month).

As Dallas Lawrence of Levick Strategic Communications argued on Mashable, companies looking to advance themselves through Twitter can’t rely on paid advertising as a useful shortcut. Sponsored search placement alone won’t be enough to give a company a platform; firms will  still need to invest in accumulating social capital through regular tweeting, communicating and chatting on Twitter if they’re going to spread their brand through social media. That’s especially true when the ads are only shown to that low percentage of users who happen to search on Twitter — and the even smaller percentage who happen to search for the company’s brand.

Clearly then, Twitter’s new advertising model is going to have a limited use as it stands. To make real money for Twitter — and to generate real exposure for advertisers — the sponsored placements are going to have to appear in timelines and not just in search results. It might be nice too if they then generated income for the twitterers and not just for Twitter and the development companies on whose products the ads will one day appear.

The most important lesson to take away from Twitter’s first foray into creating a meaningful revenue platform then isn’t what they’ve done — which is likely to change — but how they’ve done it. Like the system itself, Twitter has started small, tossing an idea out there to test the reaction and see what happens. If the ads generate interaction and if users don’t find them too obtrusive, they’ll be rolled out across the network and opened to other advertisers. By taking their time and giving an opportunity to Twitter’s users to pick up the ads and play with them, Twitter is increasing the chances that they’ll come out with a product that will work, rather than launching a system that will fail (as Facebook embarrassingly did with Beacon).

Twitter might have an unusual attitude towards a business model and a unique bottom-up approach to development but as a way of creating a growing business with a strong foundation, it’s a model that other companies might well want to copy.

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