There aren’t too many companies that can boast of having a 1.6 billion USD valuation and little or no revenues to show for it. Twitter has that distinction, something it is not proud of I’m sure. The company has been under pressure to find a way to monetize its 175 million user base. In the past it has rolled out programs like Promoted Tweets and Promoted Trends. Promoted Tweets appear at the top search results on twitter, while Promoted Trends are placed at the top of ‘Trending Topics’
Interestingly, Twitter is not the first to come up with the concept of in-stream ads – or certainly not the first ones to implement it. In January 2010, we wrote about Ad.ly, a service that placed in-stream ads and promoted ads into your timeline through celebrities’ tweets. Of course, in May Twitter banned all third party applications from placing ads in users’ timelines. Now, the company has announced that it is putting into action, the final phase of its Promoted Tweets program – InStream Ads. HootSuite, a famous third party twitter application with over 900,000 users will be partnering with Twitter for this.Some HootSuite users will get targeted Ads in their timelines, while HootSuite itself will get a share of the revenue for its troubles. Twitter CEO, Dick Costolo has repeatedly stressed the company’s intention to ‘test and test’ in-stream ads before a large scale deployment. According to a story in the Ad age by Edmund Lee, longstanding Twiiter advertisers Virgin, Red Bull and Starbucks will get the first taste of the action.
To understand the reaction developers might have to this news we have to delve a little into history. In her book, Sarah Lacy describes how in the early days of Twitter, the brain behind it all – Jack Dorsey was sitting by his brother’s side in a hospital. Dorsey’s brother had just undergone a surgery after an accident and when he showed the first signs of recovery, Jack tweeted the news via a text message to all Twitter employees. The reaction he got overwhelmed him and it was then he realized the power twitter held in its 140 characters. This was what twitter meant to early adopters and early developers. The company opened up its APIs to the world and let developers and their imaginations run wild. This spawned the entire twitter ecosystem, to which the company owes a lot of its success. So, when under the immense pressure to monetize, Twitter begins to slowly take back things it once gave the developers. They are bound to be unamused!
The buy-out of Tweetie, ban of in-stream ads and the recently announced guidelines for the Tweet Trademark – which puts clients like TweetDeck in a spot of bother – all pointed to the fact that soon Twitter would be engaged in a battle with its own ecosystem. And it would be very hard to beat. At this point, I must contrast this with Facebook’s policy.While Facebook is looking to expand its ecosystem outside Facebook.com, Twitter is looking to pull it back to Twitter.com.
Needless to say, that for now, a lot of developers – especially the smaller ones aren’t thrilled with the way Twitter has treated them. In this post from August, twitter evangelist Stuart Henshall details why he is checking out of the Twitter Developer System. The bigger ones however, are probably licking their lips at the prospect revenue sharing. Twitter isn’t the villain here, under heavy pressure to monetize it is difficult to run a company for too long on venture capital and goodwill. Twitter did it for just about as long as anyone could.
Equally or perhaps more important is the reaction of twitter users. Since the ads are likely to be well targeted its not like Twitter is going to spam timelines. Users could still find them intrusive and Twitter will have to temper their reactions or give-in if there is a large scale revolt. Which is unlikely given the amount of chatter and noise there actually is on twitter, where most of us keep missing tweets anyway – how hard will it be overlook an in-stream ad? That is also a problem from an advertisers point of view, if you’re paying money for targeted ads, you’d probably want to make sure that people actually read your ads.
What lies ahead for Promoted Tweets and Twitter
The entire tech scene is full of the precedent that free services monetize themselves – or atleast try to – through ads. So it din’t need rocket science to figure out that Twitter would eventually go down this road. But the service itself and the way it is used has changed dramatically over the last 2 years. As Twitter Exec Kevin Thau pointed out in Nokia World 2010 , twitter is no longer a social network, it is all about information. And with all this information comes a very bad case of information overload. Between celebrities and brands churning out PR spin, blog after blog tweeting its latest posts and a whole lot of other inane stuff that I cannot even begin to list. It is becoming very hard to keep up with twitter even if you follow as little as 100 accounts. I honestly don’t know how people like Robert Scoble keep up with nearly 26,000 follows. But he’s an outlier, the average twitter user would be overwhelmed at well under 100 follows. It is here that it becomes very tricky from an advertisers point of view. How would they know the effectiveness of their campaigns?
In the absence of Push Notifications for twitter, a lot of the third party applications rely on periodically polling the twitter API. So on a busy day or during heavy usage hours you get 10-20 tweets per minute. In such cases how many people are likely to notice an ad for Virgin or Starbucks amidst breaking news or live tweeting from a San Francisco Riot(as we witnessed today)? While we know twitter is experimenting with Push notifications, it could take sometime before they are rolled out at large. And even that will not guarantee the effectiveness of the new Promoted Tweets. Success with advertisers is a different thing, at least initially, as they are likely to be falling over each other to get into in-stream advertising.
What is your take on Twitter’s in-stream ads? And the way it has treated twitter developers? Let us know.