Why Twitter Should Pursue Revenue Streams Other Than Advertising

Not that Twitter isn't normally in the news, but, sheesh. Between the murmurings earlier this week that it's about to launch a shiny new ad platform and today's announcement of a partnership with Yahoo (which will allow Twitter users to pretty much have their entire Twitter experience happen while they're roaming the portal's vast content fields), it looks as though the-little-tweetstream-that-could is making headlines because it's slowly inching its way toward a business model. (You know, that thing where you make money by doing something besides making a quick visit to Sand Hill Road when reserves get low.)

But the two roads to revenue signified by these two bits of news diverge in a wood, of sorts. And I'm wondering if Twitter, like Robert Frost, should take the road less traveled.

The ad platform, obviously, promises to derive money from advertising, the tried-and-true revenue stream that's helped every media property from Collier's magazine to Facebook.

The Yahoo deal, as with relationships Twitter has set up in recent months with Google and Microsoft's Bing, calls for Yahoo to pay Twitter for the "firehose" of data the new relationship will bring to Yahoo.

I think the latter deal (and other revenue streams I haven't thought of) is where Twitter should focus its efforts, for the three reasons outlined below:

1. Twitter's data has major value to many constituencies. There's only one other entity out there -- Facebook -- that has anywhere near the same amount of real-time data, and the data is not only voluminous, but valuable to all kinds of entities, from researchers to advertisers to political campaigns to other major Web portals.

2. Teaching most advertisers to tweet is difficult business. Although details of the new ad platform are, at the very least, sketchy, we do know that Twitter monetization chief Anamitra Banerji hinted at the Interactive Advertising Bureau meeting on Monday that brands, via the ad platform, might start participating in conversations on Twitter with people who are already talking about them. That can only mean that pre-packaged ads (thank goodness) are not coming to Twitter. But it also means many advertisers have a steep learning curve ahead of them, since having authentic chitchat with consumers isn't their strong suit, Having a Facebook page is one thing; learning the ways of the Twitter-verse is entirely another. Building ad revenue by asking for a sea-change in advertiser behavior will take years.

3. Many Twitter users will see ads on Twitter as corrupting the experience. Granted, there are many Twitter users who will probably hate ads on Twitter no matter how they are delivered, but there's a real danger here in corrupting all of Twitter when ads come on board. Many people follow brands on Twitter, but those interactions are opt-in. It's hard to say whether they will be when Twitter introduces ads into its stream. (If Twitter is smart, the bedrock of the platform will be to convert free corporate accounts to paid.) At any rate, advertising is more of a liability in Twitter's carefully constructed environment than in any media property that's come before, even Facebook. It's no mistake that it has taken years for Twitter to dip its toe into this volatile sea.

I write all this with no knowledge about what Twitter is charging companies like Yahoo for its data, or what ad rates will be once Twitter does unveil its platform. But here's what I do know: Twitter is a very special experience that can't play by the rules of media, or even social media, as we've known it.

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2 comments about "Why Twitter Should Pursue Revenue Streams Other Than Advertising".
  1. Mandy Vavrinak from Crossroads Communications, LLC , February 24, 2010 at 4:58 p.m.

    It's true that teaching companies to tweet can be tough... but I think that's because companies must learn first to think about communications in a different way before tweeting makes any sense to them or for them. That's the biggest hurdle. And while the "ads are bad" theme is pretty strong on Twitter and isn't likely to go away, paying for access to the firehose of data has its own drawbacks. Twitter would in effect be selling everything about everyone to third party companies to do with as they please. Not even Facebook has loosened privacy that much!

  2. Bruce Christensen from PartyWeDo , February 25, 2010 at 9:49 a.m.

    How many times can we go to the advertising-well before we suck that water table down so low that everyone dehydrates? The current economic realities are suggesting that advertising dependency is not a great business model.

    They have a product which has a value, has been packaged in a useful way and has a demand.... Sell the service, like the real world does.