Whenever a start-up turns to advertising for revenue, something is remiss.
There has got to be more to a business model than advertising in 2011. The fact that Twitter sees advertising as (potentially) the big revenue pay day, makes me extremely nervous. Why? Because as Twitter adds and tinkers with advertising, what they may not be considering is that the people who are engaged with Twitter are now grappling with advertising (especially if it starts to clutter their streams). It wasn’t a part of the initial equation and while all good and free things need to be paid for by somebody, few people appreciate the sudden interruption that comes from advertising. In the case of Twitter, it’s also an early indication that they have no clear revenue model beyond the hopes that third-party advertising will drive all monetary results.
Is advertising bad?
Of course not (and please consider the source: me… a Marketer). It’s not about the efficacy of advertising as it relates to Twitter. It’s much more about trying to re-imagine the power of the platform that Twitter has in front of them and perhaps the marketing and business opportunities that lie beyond the simplicity of advertising. It’s clear that the threat of advertising ruining the Twitter experience is real. Look no further than the Fast Company article from yesterday titled, Can Ad-Littered Twitter Keep Its Cool?: "In 2010, Twitter pulled in just $45 million in ad revenue, according to eMarketer. Facebook, on the other hand, pulled in $1.86 billion. Founders of Twitter have been averse to traditional ads, the ‘coolness’ factor always an important reason why. ‘The overall experience [of Promoted Tweets] will hopefully be something that’s very native to the network, very relevant, and fitting along with all the other tweets you’re seeing,’ cofounder Biz Stone told the Associated Press last year. ‘If they’re not cool, we just won’t show them.’"
When Google first introduced AdWords, the concept made a lot of sense: if no one clicked on the ad, the advertiser didn’t have to pay. As the AdWords platform evolved and became increasingly popular, the model shifted slightly with the additional pressure being put on the advertiser that if no one was clicking on their ads, they would be booted off of the system. Google’s message was clear: if consumers like the ads, they’ll click. If they don’t like the ads, you don’t have to worry because we’ll remove you or force you to create a more compelling ad that will get people to click. Beyond that, Google’s ads were never a part of the organic search results (they lived either on top of them or to the side). How will Twitter know what is cool? Will it be people clicking on the tweet? Retweeting it? Following the brands? Currently, the idea is that promoted tweets will only appear in the stream of people who have mentioned the brand or are somehow related or interested in the products and services.
It’s still advertising… and there’s so much more marketing innovation that can be done.
There is gold in the data of Twitter. Just look at what what start-ups like Reach.ly (hat-tip to Paul) and Needium are doing. When Ad Age published the article, Twitter Gets Influx of Cash, Goes for Madison Avenue, on August 1st, 2011 my initial reaction was: "no… don’t listen to what Madison Avenue is going to tell you! Don’t get lured down the road of eyeballs, impressions and the glitz that goes along with it!" Much like Google (pre-AdWords), Twitter has an amazing opportunity to help us CTRL ALT DEL the world of marketing. To do something more beyond the obvious advertising. To lead in the area of marketing innovation and newer forms of advertising. What if they spent some time away from traditional advertising models (and ad agency folks) and experimented with new ways to connect brands with consumers? They just got a healthy injection of financing (see: Funding Values Twitter at $8.4 Billion), so the opportunity is now.
There’s got to be something out of the $800 million that can be carved away for new business model initiatives?
It’s not just that Twitter is chasing advertising that is alarming. It’s that they really don’t have the digital real estate to support it. Who uses Twitter on Twitter.com? How will they distribute ads? With the Twitter stream being so real-time how can advertisers find value in it?
This said, all bets are off if they discover an innovative way to deliver advertising value in an “out of the box” manner. Maybe TweetDeck will get redesigned to accommodate advertising beyond “promoted Tweets.” I never understood the value in Promoted Tweets anyway.
Good topic of conversation Mitch….
True. Unfortunately, they likely won’t be willing to run the risk of doing the extraordinary, especially not after getting a big $800 million dollar ‘boss’.
I’ve said since 2008 that Twitter’s gold mine is in selling access to deep data mining. Apparently, they don’t know enough about how to mine those insights, because it’s clear they don’t know how to sell it.
Very true, Mitch. Twitter is aware of the dangers of promoted tweets, but also under the gun to turn a profit. The recent round of funding came amongst the launch of G+ and the rather small – but annoyingly true – notion that Twitter’s product has been stagnate since the launch of its new version.
“Deep Data Mining” sounds cool, but how can that be turned into money? As Ike suggested, what would they sell? What can twitter data tell me that AdWords retargeting cant?
It’s definitely interesting to see exactly where twitter goes from here…
Will adverticed tweets work at all?
Any stats on it?
I’ve mentioned because 2008 that Twitter’s gold mine is in marketing entry to deep details mining. Apparently, they don’t know adequate about discover ways to mine individuals insights, merely because it’s obvious they don’t know discover ways to market it.
This article is bang on. The crux of the matter is pretty compelling. You create a product which is both unique and innovative and it’s core DNA is its inherent simplicity. Yet, you try and monetize it with the same old tried and failed techniques.
I am living this right now with my own venture where we are placing as much emphasis on innovation (as it relates to the revenue model) as we are the product.
In twitters case, I believe the trap they set for themselves (and I’m not being critical) is the belief that the revenue model would be a by-product of success, in other words we’ll figure it out, lets make this product as big as possible first.
The traditional ad model would never work here, I go in and go out. I’d love to brainstorm this problem, there’s some really innovate thinking just waiting to happen.
I wonder why Twitter didn’t start with a freemium model; Tweepi and HootSuite shouldn’t exist, those kinds of premium memberships should have been offered early on in-house.
I agree with you, they seem not to have thought hard enough about monetization early on, trusting that eyeballs would, uh, somehow make money. By neglecting freemium services they’ve spawned a whole bunch of now-mature competitors. I could imagine one of them eventually buying Twitter.
I guess a metaphor would be your company lays rails, for free, and lets other companies charge for access to those rails. Wake up one morning and they may as well no longer be your own rails.
Great post. It’s a shame I can’t share it on Twitter.
Not sure why you can’t this on Twitter… or am I missing something?
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