Social Media Insiders Fiddle While Twitter Burns

Many have written about in-tweet (also called in-stream) advertising. Just in the past few days, among many posts on this topic, Mark Suster asks whether it’s a good idea to have ads in tweets and concludes that it is (Mark is an investor in Ad.ly – one of the companies making possible in-tweet ads). Robert Scoble is not a fan of in-tweet advertising but points out that “people who produce content should be able to make a living for producing that content.” Nick Halstead, CEO of tweetmeme, argues that companies should leverage re-tweets for in-stream advertising. Seth Simonds asks whether he is worth money to his followers/reader. The discussion has even moved into the mainstream media – The New York Times cautions that A Friend’s Tweet Could Be an Ad.

The discussions around in-stream advertising are intellectually interesting. However, they obfuscate a bigger problem: in-stream advertising can (and I believe, will) destroy Twitter.

Here’s why: imagine if Google allowed paid search listings within organic search results. Sure, paid listings could be clearly marked as paid. Why has Google not done so? Because including paid listings within organic search results would compromise search.

What if Google allowed another type of transaction: imagine if Google allowed pages that attained a high PR value to sell the title or description meta tags (or both) to a third party for advertising purposes. If this was done, search results would be far less meaningful.

In each of the above examples, there is a predictable outcome. People would search less often. Fewer people would click on adwords ads. And Google’s core business model would suffer.

The impact of in-stream ads is further complicated by the recent search deals that Twitter signed with Google and Bing. Both search engines are now indexing tweets and the organic search results will contain sponsored tweets – the equivalent of having paid search listings within organic search results. This is a disaster waiting to happen – it’s precisely what Google has worked hard, for ten years, to avoid.

In-stream advertising threatens Twitter in much the same way. Some people won’t care, but many may object to seeing advertising in their streams. They’ll leave (or a competing service, without in-stream advertising, will present a more attractive venue for conversations).

I wonder whether we’re confusing two mostly unrelated issues when we talk about in-stream advertising. On the one hand, everyone recognizes that Twitter must ultimately find ways to monetize. On the other hand, Scoble is right that content producers should be able to make money for their content.

If the issue is how Twitter could make money, I believe there are better options than in-stream ads. While traffic to Twitter’s site appears to have flattened, Twitter has historically not done much to promote traffic to its site (until recently). An adwords-like program for Twitter search could be one way for Twitter to monetize. Twitter could require that Twitter clients incorporate a way to list advertising somewhere in a separate area of the client UI. Twitter could include ads in Twitter notifications. There are many more possibilities, and Twitter has some extremely smart people on its team that should and will figure out the right business model (when the time is right).

If the issue is how content producers (and companies that make Twitter clients, for example) can make money, that’s an entirely separate question. Content producers indexed in Google and Bing make money in many ways – but they are not directly paid merely because they appear in an organic search. The benefits are indirect (for example: people click on a link in a search result, find your product or service helpful, and buy it). Twitter should learn a lesson from Google and resist the efforts to directly monetize the content. While the short term benefits might seem nice, the long term consequences can be devastating to Twitter. Ben Kunz, in a comment to the post from Seth Simonds, nicely articulated a view I share:

Selling out your public voice diminishes your value and is the fastest path to zero.

Giving away your public voice raises your value and intrigues us to want more. This is the slow path to building credibility.

Then, selling private thoughts — agency work, consulting, specialized white papers — to the clients who inquire, wanting more, raises your value and achieves monetization. This maintains your credibility and integrity, because if you are not authentic in such recommendations, clients will fail and know you lied. If you are authentic in such private thoughts and clients succeed, they will know you told the truth. This is the hard path to success.

In-stream ads are already out there. Some people are already making large sums of purportedly easy money by promoting products and services they know little or nothing about. I’m not so worried about their credibility – their followers will decide whether or not they should continue listening.

I am worried about Twitter’s credibility. It’s on the line.

What do you think?

  • http://userglue.com Russ

    I think Twitter’s going to make money in how they “open up” to the world access to their data beyond the APIs (that is, they really limit how far back you can go, etc.). I think in-stream advertising won’t be a big enough draw in comparison, but a subscription to that data stream? Yum.

  • http://www.gosquared.com/ James Gill

    You’ve raised some interesting points here Ross. I agree – I think Twitter will severely suffer if they sell out by allowing anyone to post tweets with the motive of making a quick buck.

    On the other hand, you made the point of Google keeping AdWords clearly separated from organic search results, what if Twitter were to introduce a form of advertising system akin to the implementation of ads within Tweetie on the Mac and Twitterrific on iPhone where every 50 or so tweets is broken by a targeted ad placement? What if Twitter were to implement a similar strategy to earn revenue for themselves, perhaps ignoring (for now) the need for users to monetize their stream?

    I’m in the mind that this may not be the best strategy right now – despite Twitter’s rapid expansion into the mainstream, is everyone going to put up with ads in their stream regardless of where they consume it?

    The obvious opportunity that would evolve from this would be for Twitter to charge for “Pro” accounts of some form which would allow for users to opt out of receiving ads.

    Perhaps these aren’t the best ideas for Twitter’s future right now though – I can see the backlash they would cause already, but they’re gonna need to bring some revenue in some day.

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  • http://thelostjacket.com Stuart Foster

    Having seen in-stream advertising and what it looks like on services like Digg? I have absolutely no problem with this what so ever. Just call it out as an ad and everyone will be happy.

    Twitter needs a business model. This sort of gets them 1/4 of the way there.

  • http://www.rosskimbarovsky.com Ross

    Russ and Stuart – I’m not certain that in-stream advertising, at least as currently implemented by companies like Ad.ly, is a monetization strategy for Twitter. At the moment, Twitter makes NO money from those services. Twitter could turn around and require those services to share revenue, or pay fees to Twitter, but that hasn’t happened and it’s unclear whether it will.

    Stuart – what does in-stream advertising look like on DIGG? Is it in the comments or in the stream of the posts that people vote on? Would you say the user experience on DIGG is an analog to that on Twitter? That’s where I’d focus and I see the experience on the two networks (and the people who use them), vastly different.

    James – I agree that Twitter ultimately needs a revenue model. Clearly, they’ve decided for the moment to focus on growth and not revenue (history will tell whether they made the right choice. Google did the same thing at one point).

  • http://marketingtechblog.com Douglas Karr

    It’s all about expectations. I’ve always been surprised that Twitter didn’t charge for API access to its data. I believe that would ‘thin the herd’ of useless applications that are burying Twitter in API calls.

    If Twitter is able to set an expectation with a client on whether or not an ad arises, it will probably educate the user to ignore it and impact might plummet. I’d rather see Twitter build a very robust monitoring and response engine… perhaps buying Radian6… so that companies can be alerted and can respond when their companies, products, services or people are mentioned.

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  • http://www.rosskimbarovsky.com Ross

    Douglas – I agree that expectations are important. I’m not sure that it makes sense for Twitter to charge for API access until users of Twitter’s API are able to monetize their own activities. Of course, as is true of in-stream ads, that already appears to be happening so nothing stops Twitter from requiring revenue sharing (if they allowed such practices to continue).

    Interesting thoughts about analytics. Radian6 is a broad product – I wonder if such a purchase would cause Twitter to lose focus – they’ve done a pretty good job patiently keeping their eyes on the road.

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