5 Questions about Twitter Advertising

Among those things in the digital world that are always about to arrive but never seem to get here is a business model for Twitter. As you will recall, co-founder Biz Stone and others have been saying for years that they are working on plans to monetize the site's huge traffic, but the grand unveiling still hasn't happened.
Only in the topsy-turvy of digital economics would you find a CEO proudly saying, as Stone told a New York Times reporter a year ago, that despite earning interest on its unspent venture capital and getting royalties from a joint venture with Microsoft and Federated Media, "Twitter does not have meaningful revenue."
Thus, it rates as news when a Twitter executive acknowledged this week that, yes, an ad platform is under development. "Imminent," even.
Well, I'll believe it when I see it. Meanwhile, a few questions and thoughts from an old media guy on this new media wunderkind.

How long can Twitter wait before generating substantial revenue?
Twitter watchers may be impatient to see that evanescent business model, but Twitter can take as much time as it wants. As long as traffic is bigger than big and keeps growing, a digital enterprise can stay on that track and monetize later. Remember that little startup, Google, became more and more widely used for several years before it posted any ads. This startup is rightly cautious about not muddying the Twitter experience.

Would advertising ruin Twitter?
I'm with commentators who say the occasional ad -- or perhaps branded tweet -- would not despoil the service. If you love it and are getting it for free, how can you begrudge the provider a paid sponsorship? That has been the norm in broadcast forever.

In an interview with MediaPost, Twitter's Anamitra Banerji hinted at an unobtrusive strategy. During a panel at the IAB Annual Leadership Meeting, Banerji asked, "What if brands start to participate" in discussions of their goods and services? The head of product management and monetization at Twitter said ads would be "relevant and useful, so the user doesn't think of it as an ad."
What would ads look like?

Seth Goldstein, the head of SocialMedia.com and the moderator of the IAB panel, offered a glimpse of how Twitter might treat various ads. Odds seem to favor an "in-stream" approach that differentiates between purchased tweets and others.

Since Twitter was born as a service to be used on mobile devices as well as a computers, might there be different advertising opportunities on browser-based Twitter than on the small mobile screen?
Who will place ads and receive revenue from them?

It's critical, but by no means clear, whether Twitter is talking about only "owned and operated ads," as Goldstein called them during the IAB panel, or concurrently creating a standard for publishers who want to sell ads around their own widely followed streams of tweets. (About 2.3 million people follow @nytimes.)

Twitter's Banerji told MediaPost that the company "is completely comfortable around other people innovating around us" so long as Twitter can avoid "bad ads" that reflect negatively on the company. (Colon cleansers, anyone?)
Where does advertising fit into Twitter's overall business model?

One of the better discussions of the Twitter business model puzzle is a post by David L. Smith on the Harvard Business Review site last October. He suggests that advertising and subscriptions are not the only options. (Web entrepreneur Jason Calacanis suggests something similar.)

For example, in 2008, Twitter acquired search.twitter.com, bringing Summize's successful staff in-house. Smith identifies several other early-stage ventures, which essentially amount to tutoring companies small and large (like Dell and Best Buy) -- in how to use Twitter as a sales or customer-relations tool.
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So advertising, while hardly incidental, may not end up being the main event in a fully formed business plan.

For now, my hunch is that Twitter remains a digital golden goose -- the size, shape and weight of those golden eggs still to be determined.


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