Will Promoted Tweets Earn Twitter Revenue to Infinity and Beyond?

twitter-iconThe first Twitter Promoted Tweet came as no surprise. Promoted Tweets and Trends were announced back in April. Last month, Twitter modified its Terms of Service (TOS) to prohibit third parties from injecting paid tweets into a timeline on any service built on the Twitter API. And it makes sense that the first Promoted Tweet was from a big, visible advertiser – Disney/Pixar. There was no user revolt and blogosphere comments range from inquisitive to supportive, with only a few criticisms. Twitter did it right.

Are the new ads “ingenious?” Maybe, but only if carefully understanding your product, market and potential advertisers – a tried-and-true advertising strategy – is so rare it significantly differentiates you from the pack. Twitter supported its moves with comprehensive posts on its blog; it is unlikely that many users read these, but the posts provide a public position to which everyone inside and outside of Twitter can refer.

As we reported earlier in the week, consumers are more willing than ever to pay for convenient and personalized content. Having Promoted Tweets and Trends on one’s Twitter home page seems a very small price to pay. A significant percentage of Twitter users experience the service using third-party applications, so they won’t see the Promoted Tweets. One could suppose that Promoted Tweets and Trends will become part of the Twitter API, with developers getting a piece of the action, to increase CPM and ad revenue.

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Ads put into the stream by celebrity Twitter users can earn them as much as $10,000 per tweet, so companies such as Ad.ly, who facilitate these ads, appear to have modified their operations to comply with the new Twitter TOS. When asked about Promoted Tweets, Derek Rey, VP of Sales & Marketing for Ad.ly is quoted by MediaPost as telling them “it’s hard to take it seriously – at least as an ad model – because it’s ‘so granular.’” In response to our inquiry about how the roll out of Promoted Tweets and the change in Twitter’s TOS might impact Ad.ly, a spokesperson referred us to this entry on the Ad.ly blog.

A Twitter blog post on the day of the TOS change stated, “Third party ad networks are not necessarily looking to preserve the unique user experience Twitter has created. They may optimize for either market share or short-term revenue at the expense of the long-term health of the Twitter platform.” But altruism goes out the door when a company accepts its first penny of outside funding, much less $160 million. Whether Promoted Tweets and Trends are a huge flop or overshadows iAds, Twitter will feel pressure to increase revenue.

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Twitter, so far, appears to be smart about how they are rolling out their advertising vehicles. And it could take years for the system to shake down and prove its mettle, so we need to be patient about drawing conclusions. The short-term questions that the social web should be asking are whether Twitter takes additional actions to restrict third-party advertising and, most importantly, whether the ads appear to be able to create significant revenue.

Twitter did not respond to our request for further information in time for this post.

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