Twitter Carves Ad Space

These are heady times for Twitter. The service is reportedly valued at $7.7 billion. That’s a lot of money for a company with a tiny amount of revenue. The pressure will be on in 2011 for Twitter to prove it has the potential to become a big media business.

This weekend it took another small step along that route with the introduction the first advertising on its mobile application for iPhone and iPad. Twitter’s not calling Quick Bar an ad unit, of course, but that’s what it does. It flashes on the top of the stream of tweets current trending topics. Every now and again, it will show a promoted trend from one of Twitter’s advertisers. Naturally the move provoked a smattering of complaints.
As All Things D points out, Quick Bar is Twitter’s most intrusive ad move to date — and likely a harbinger of more to come. Its early ad products have mostly stayed out of the user experience. Promoted Trends sit on the side of the Twitter page and Promoted Tweets appear on search results pages. Twitter isn’t yet dropping ads in the stream of updates.  With Quick Bar, Twitter is clearly attempting to spread its existing ads more broadly while dressing the unit up as new feature of the service.
The fact is for Twitter to grow a substantial ad business, it will probably need to transfer to brands much more consumer attention. That will invariably mean getting more intrusive with ad placements. There will always be those who say users will revolt over advertising. Facebook heard the same things. It now has a thriving ad business. Like Facebook, Twitter has tried to craft ad products that mimic the user experience of the service rather than adopt formats used by Web publishers.
Luckily for Twitter, thanks to its open platform, it already has outside companies working on new models. Look no further than Ad.ly, which helped get Charlie Sheen on Twitter last week. The troubled star already has nearly 2 million followers — and plans to start feeding ads into his stream. Ad.ly has a network of about 1,000 celebrities it matches with brands. Ad.ly gets up to $2 per click for its campaigns, according to Arnie Gullov-Sigh, the company’s chief executive. “Advertisers see it as a scalable and efficient way to advertise on Twitter,” he said.
Then there’s the Twitter ad networks that are displaying ad messages in third-party applications. Networks like OneRiot and 140 Proof are doing this successfully. OneRiot CEO Tobias Peggs says the click-rate on these placements in “crazy good” at about 1 percent for Android devices and typically four times what mobile banner ads draw. OneRiot targets ads based on user interests displayed by what they tweet about and who they follow. It ran a campaign for Chevrolet during the Superbowl that drove sports fans and car enthusiasts to its YouTube page.
“We see Twitter as a consumption medium,” said Tobais Peggs, CEO of OneRiot. “The biggest use case on Twitter is to consume tweets and follow links, rather than publish tweets or post links. Users will consume organic content and paid-for content as long as they are in context and interesting.”
The question for Twitter is how it coexists with these third-party companies and which ideas it chooses to co-opt. There is a case to be made that Twitter should look to control all advertising on the platform to guard against a negative user experience. Peggs doesn’t think that’s going to happen.
“I look it at it like this: We’re generating revenue and channeling it back into the ecosystem of apps (through rev share agreements), which is funding further innovation to bring more users into Twitter, generating more content, for more people to consume in more interesting ways,” he said.. “It’s contributing significantly to the vibrancy of the overall platform, which can only be a good thing for everyone concerned.”

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