How Will Twitter Generate Revenue
Posted on 27. Apr, 2010 by admin in Social Media
It has been widely reported that Twitter will soon be unveiling a monetization solution.
Speculation has been rampant with several blogs making predictions on what they think the solution will consist of.
Twitter certainly has many ways to go about revenue generation. At the end of 2009 – Twitter inked deals with Google and Bing to syndicate their Tweets to those respective engines. It was reported that Twitter was paid a bounty for this data. And, more recently, Yahoo inked a deal to publish Tweets on their network of websites. While these deals can bake in a revenue stream for Twitter – it most certainly isn’t the end goal.
According to Alexa, Twitter is the 12th most visited site on the internet. This traffic comes primarily from three different functions. The first, would be users that go to Twitter to post status updates. The second, would be from users that go to Twitter to read updates from the people that they are following. The third, is people that go to Twitter to use the search engine – as a way to see what people are saying right now about a certain subject.
Twitter won’t be looking to generate revenue off of the first group, because those are people whom are trying to communicate on Twitter. The second group, could easily be monetized, as an ad unit could show up within a users friends timeline. This would be a challenging solution because it is difficult to target an ad to a user whom is simply reading updates from all of the people they are following. Plus, a continued problem on Twitter is that there is a lot of noise posted by followers, so if ads were also added into the friends timeline, less people would go there to read what their followers are saying. So, the Twitter search traffic is the most likely place Twitter will go for monetization.
The renaissance of the web happened around 2002 due to the success of search advertising. Companies such as Overture, which was later acquired by Yahoo, had proven to web advertisers that search traffic converts. This was the business model that Google would deploy to monetize their ever popular search engine. So, with distribution in place on sites such as Google and Yahoo – and advertisers moving more and more online marketing dollars into the search marketplace – a successful web business economy was produced.
I think Twitter will go down a similar path. People who perform a search at Twitter can easily be targeted, and this is traffic that advertisers will want. Plus, by displaying ads in its search results, Twitter won’t disrupt its core functionality of Tweeting and reading Tweets from followers. Getting advertisers won’t be difficult, but it could take time, so Twitter could potentially publish another search engines advertisers (such as Google, Yahoo, or Bing) at the get go as a way to start generating income from day one. Then, over time, Twitter could sign up its own advertisers directly to publish into their search results. Another option would be for Twitter to go the Facebook route and only display ads from advertisers that signed up directly on Twitter from day one. Either way, down the line, Twitter could figure out a way to distribute their advertisers into users friends timelines potentially in an adsense like unit down the side of the page. But, at the get go, Twitter has the traffic on its search engine, which they can easily target ads too, and that’s where I think the ads will show up.
For added revenue, it has also been speculated that Twitter will offer up its advertisers to applications using its API, and it would then share the revenue with the application. So, applications that interact with Twitter, such as Sency or Seesmic; would have the option to promote Twitter advertisers for a cut of the profits.
Twitter hasn’t focused on making money as of yet. They have been concerned with their platform, site traffic, and third party developers. However, when you are the 12th most visited site on the web, and when a large portion of your traffic is search traffic – you are going to easily be able to generate revenue. It is also important to note, that real time web traffic won’t be as value able to advertisers as traditional search traffic – because it is less commercial in nature. So, while revenue will easily be generated by Twitter, I don’t foresee the revenue made per visit being on par with what the traditional search engines have been able to produce.
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twitter more and more users, more and more ways to Generate Revenue.
@SysComm – You’re right. They have played it tight for a long time now, not wanting to burst their own bubble by being obtrusive or getting negative press with the wrong type of revenue platform. It’s to the point that they really have to hit a home run (in profits as well as technique) for them to not fail miserably.
Since they haven’t been using much monetization techniques until now, Twitter needs to be really careful about who’s going to target now and how it might impact on the users. If they don’t find a good option, they might end up with a decrease in their traffic, caused by unsatisfied users.