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Twitter is Going to Make Money Off of You; Are You Going to Make Money Off of Twitter?

Posted by Marty Hudson on May 24, 2010 5:50:48 PM

As we have discussed in earlier blogs, people have been looking at ways to make money with Twitter; mostly using it as a “real-time” advertising medium.  For example; Kogi Korean taco truck, L.A.'s culinary obsession.  They send Tweets to let everyone know where they are going to be and their customers flock to their location.  Well now it's time for Twitter to make its money.

There will be two "pillars" to Twitter's business model, Chief Operating Officer Dick Costolo said at the company's Chirp developer conference in San Francisco. The first; promoted Tweets, which lets advertisers pay for sponsored tweets that appear at the top of search results for certain keywords.  The second pillar will be commercial accounts which will allow a business to pay for a Twitter account in return for detailed analytics tools and the ability for several people to post to the same account, currently in beta testing. 

I am not sure how “Promoted Tweets” will work since some businesses, i.e., Kogi Korean, are already creating their own promoted Tweets.  Promoted Tweets show up today only in searches, Costolo said, (not quite right).  Location-based information will likely follow, he said, allowing Starbucks to show a Promoted Tweet to users in a particular city, for example (already being done).

It's a simple plan but, Twitter has the tendency to be a commercial anyway.  Secondly, how do they plan to post advertising on something that users believe is an ad-free service.  It also begs the question of what is Twitter going to do with the personal information it gleans about users' habits and interests from their Twitter feeds.  A goldmine of personal information; Twitter feeds reveal so much about peoples’ interests, taste in music and more.  Costolo called it a "real-time social interest graph" -- a pool of valuable information about the topics its users are currently interested in.  A potential backlash may occur if they don't respect users' privacy.

Twitter will split the revenue it gets from Promoted Tweets 50-50 with third parties that take part, after it has subtracted various infrastructure costs and other expenses that will probably amount to 8 or 9 percent, he said.

Twitter will sell Promoted Tweets initially using a traditional CPM model, in which advertisers pay for the number of times their sponsored tweet is viewed. But it will soon move to a more complicated model that Twitter calls "resonance," which has to do with how many times a tweet is viewed, retweeted, replied to or marked as a favorite.

These guys are pretty smart.  They are rolling all of this out at an intentional slow pace.  This will provide for feedback and adjustments to their plan on the fly and eliminate any shock factor if they just ‘crammed’ it down tweeters’ throats.  Regardless, the folks at Twitter have created quite a system and have patiently waited for their payday.  One thing is for sure; Twitter is Going to Make Money Off of You; Are You Going to Make Money Off of Twitter?

---Marty Hudson

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