Twitter's not-so-new-anymore chief executive Dick Costolo has been charged with fully commercialising the company since he took over in October last year, but beyond tightening up on third-party services it doesn't seem much clearer how the service will make money.
So far Twitter has introduced promoted tweets (roughly comparable to Google's sponsored search results) and in-stream adverts seem just a sniff away - though Twitter will have to be very clever not to trigger a fresh wave of protest from users when those get rolled out.
Photo by Fortune Live Media on Flickr. Some rights reserved
Promoted tweets rolled out in April 2010, adding paid-for promotional tweets to the 'dickbar' at the top of the official Twitter apps and also at the top of search results. Promoted trends and promoted accounts followed suit.
But there's at least one more iron in that fire. Speaking at the Fortune Brainstorm conference in Aspen yesterday, Costolo gave two clear examples of how Twitter could take a cut of sales generated by promotion on Twitter.
"There's a commerce opportunity there for us to take advantage of if we want," he says.
"When the Google IO conference was taking place, they tweeted the morning of the opening of the conference, 'Hey, you know, 100 tickets left, 550 bucks a piece, use this promotion code,' and then I think 11 minutes later tweeted, 'Sold them, thank you,' you know, $55,000 with one tweet in 13 minutes."
"The San Diego Chargers tweeted on a Saturday afternoon, 'We need to sell a thousand more tickets so the blackout can be lifted in San Diego tomorrow,' and 40 minutes later tweeted -- or I think 40 minutes later or so tweeted, 'Sold those'."
Costolo confirmed that Twitter is developing a self-serve system for ads, just like Google and Facebook, which would let advertisers on any scale build and roll out their own ads through the Twitter API.
Engagement rates 'up to 50%'
"Our engagement rates are through the roof," said Costolo. "We are seeing ads literally with click-through rates and engagement rates of 30, 40, 50%. I think the highest one of all time was Volkswagen ran a promoted tweet for their new VW Beetle that actually had an engagement rate, where an engagement is a click, a reply or a retweet, of 52%"
Costolo had also prepared some statistics: a billion tweets are sent every five days, Twitter has seen 160% mobile growth in the past year and the number of advertisers has increased six fold to around 600 this year.
In an interview with AdWeek last month, Twitter president of global revenue Adam Bain explained how this would work, extending the existing control dashboard that shows the response to each tweet in a campaign and breaks down the demographics of followers.
Details are still scarce though, particularly on the user experience of all this. How will Twitter moderate the flow of ads so that users aren't bombarded? And could users pay a premium for an ad-free experience? I know I would, though it's unlikely Twitter will go down the freemium route as their advertising offering demands building audience as much as possible. (I'd pay at least £10 per month for a premium Twitter account.)
Twitter - worth $8bn?
As Costolo also pointed out, however, Twitter is a private company and quite at liberty to keep its strategic commercial plans under wraps. But whatever Costolo is telling the investors appears to be working; AllThingsD reports that Twitter is about to close a new $800m funding round that values the firm at $8bn.
Investors include JP Morgan's growth fund and Russian Facebook-backer DST Global, but this deal doubles the valuation that Twitter had just seven months ago when Kleiner Perkins invested $200m. Its revenues are estimated to be around $200m annually - coincidentally the same as the number of user accounts.
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Source: http://www.guardian.co.uk/technology/pda/2011/jul/21/twitter-advertising
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