About an year ago, when Biz Stone, co-founder of Twitter was asked about the business model for the micro-blogging website, he stated that Twitter was concentrating on increasing its value rather than deciding on a business model. He also was of the opinion that Twitter would not likely go down the road of online advertising, for fear of alienating its users. But how long can a company sustain on venture capital without a business model? Finally, Twitter had to sigh in defeat and join the bandwagon of online advertising.
2009 was a year where twitter made a small profit due to its search deals with Google and Microsoft worth $15 million and $10 million respectively. This deal allows the search engines to include real time tweets in the searches. It is not clear whether the deals would provide Twitter with an ongoing revenue stream or were mostly upfront payments. So, Twitter decided to incorporate the time and tested ads as a source of revenue. While the Twitter home page features only one ad, in addition to that, Twitter has decided to put up ads in its internal search results.
Promoted Tweets is an experimental initiative. This allows advertisers to display ads that appear at the top of search results for some particular keywords. Another feature is a commercial account. This account enables multiple people to post through it as also equips them with analytics tools and longer tweets.
Amidst this, Google has recently announced a new type of display ad that lets advertisers attract more people to their twitter accounts. The format of this ad would be the twitter bird icon with the advertiser’s latest tweet displayed with a follow me button that takes the user directly to the twitter account of the advertiser.
Third party apps have taken a liking to twitter. These apps do include advertisements, of which twitter takes a cut. A boom in this sector by giving app developers more incentive seems to be an option that twitter is looking at. Another addition to its business model could be targeted advertising along the lines of facebook. But the recently controversies about privacy may deter twitter from taking this path.
Most users spend the bulk of their time on twitter reading or posting tweets and not searching. Twitter, displaying only one ad for search results, is seriously limiting its revenue because ad industry is one where subtlety rarely works. Twitter has turned down acquisition offers from facebook and Google is showing continued interest in the service. If at all Twitter decides to close down, its exit strategy is well chalked out. Nonetheless, what do you think of including ads in the tweets? Do you think people will get pissed off enough to leave the micro-blogging service? Will twitter become as famous as facebook when it comes to social media ads?