• by Diane Mermigas , July 10, 2009

Finding a formula for making money on Twitter and other social networks would jump-start an elusive economic recovery for media. But the best industry minds gathered in Sun Valley, Idaho, last week demonstrated why they could be standing in the way of their own progress. </p><p>

They are viewing Twitter through the wrong filter.<p>

Twitter skepticism trickling out of the Allen & Co. conference (closed to the press) was characterized by IAC CEO Barry Diller. "I just don't think it's a natural advertising medium," Diller was quoted as say. <p>

And that's precisely the problem. Workable revenue solutions for Twitter cannot be created as long as executives continue to drive their notions and assessments through an advertising-anchored old filter of standards and expectations. None are applicable to the free-wheeling world of micro blobbing, as evidenced by the anecdotal Tweets shared by members of the press relegated to the periphery of the closed conference.<p>

Even newcomers such as Facebook CEO Mark Zuckerberg and Twitter CEO Evan Williams appear stumped. The profitable Facebook is testing marketing approaches and payment systems after failing with its short-lived Beacon feature. Twitter also is contemplating access fees for companies seeking to mine users and data flow about preferences, as well as useful tools and services. Companies' intensified use of Twitter is generating revenues from their Twitter and other social-networking exposure -- usually without spending a dime. <p>

Pressure to devise business models intensified with eMarketer's new prediction that domestic ad spending on social networks will decline 3% to $1.1 billion in 2009 (a reverse from the original forecast for 10.2% growth). Facebook advertising will grow 9% to a $230 million. <p>

The one universal failing: No one appears to be getting inside the heads and following the furiously texting thumbs of Twitter devotees. Media mavens talk about monetization from the standpoint of what media and Madison Avenue want, rather than what's most relevant to users. The creation of effective marketing and measurement will have to begin with an entirely different orientation, as suggested by Interpublic's methodology overhaul. <p>

Satisfy the information and functionality users want and need at any given moment, and the revenues will follow. Interactivity is all about the intimate and relevant connections users and interest third-parties will sometimes pay to access. <p>

The social Web is evolving into "a backdrop for every online activity" in which social relationships and functionality fuel a new era of social commerce, Forrester analyst Jeremiah Owyang explains in his "The Future of the Social Web" report.  Social networks promise to become lucrative when consumers can use their short, instant informal communication with friends and family to solicit and act on the information they need. <p>

Consumers need to be able to sidestep the Tweeting nonsense (I am eating a burger, though my cholesterol count is 450) to shout out for recommendations from trusted network members on an imminent purchase, act or decision -- from seeing a movie and finding a parking spot. Connected functionality with e-commerce truly integrates social-networking applications. Individual user relevance is the sole drive. Media and marketers follow the lead with the exchange of goods and service. <p>

This notion is not new and is at the heart of numerous related services dancing around the edges. That growing list of Twitter applications includes Gigpark, Glue, cheaptweets,  FriendFeed, The Branch, Magpie, and iknowTweet to Twitter Answers, toanswer, Twitter Search and Twitter Widget. When the best of them can be collectively executed in a real-time, hyper-local user-centric micro-blogging connection, then Twitter and its peers will make money. <p>

The power of online word of mouth is formidable  if users act on recommendations from family and friends, according to a new report from Mintel. It's not a breach of the intimate micro blogging ecosystem or of user privacy if consumers elect to use Twitter to get relevant information. <p>

Little wonder that Twitter is planning to make money from e-commerce based on product and service recommendations shared by users. Third-party applications such as TweetDeck and Filttr enable users to sort their Tweets for more effective usage. <p>

Reid Hoffman, the CEO of the profitable professional social network LinkedIn, insists it will be "easy" to make the rapidly scaling Twitter into a business when it reaches critical mass. "The question is whether it's a moderate or huge biz," he said last week. Jason Calacanis has suggested business models that seize on and respect Twitter's 100% opt-in core. That could include periodic, targeted in-feed ad messages, a new form of SMS marketing and a subscription-based professional version of Twitter.  <p>

As Twitter and its peers integrate more ways to serve consumers, "they will learn to leverage their new role as customer-relationship intermediaries," Owyang says. Marketers will revamp their orientation around new relationships with key online "influencers."  "Expect search engine results to serve up information based on what friends have clicked on and on the choices of people who share similar traits to the searcher," Owyang predicts. <p>

The bottom line for those seeking Twitter fortunes is not so different from why social networks work: It's by and for the people. Period.