Twitter is Taking a Gamble

As an Internet advertising agency we look after lots of companies display and search accounts. Last week we were delighted to hear Twitter’s long overdue announcement, which stated they will begin to roll our advertising on Twitter.com. How this will affect advertisers spends and twitter’s audience levels remains to be seen.

Twitter is a phenomenon which has struck the world with tornado like intensity. It is reportedly worth $1 billion and is a privately owned company with less than 200 employees. However, 2009 was the first year it became profitable since its inception in 2006. This profit amounted to around $25 million and was generated through deals made with Google and Microsoft to show Twitter updates in SERP listings.

Twitter users tweet updates and discuss anything they like within these updates which can be no longer than 140 characters in length. Twitter are initially planning on allowing companies such as Starbucks and Best Buy to advertise using what they call “promoted tweets”. These tweets will look the same as regular tweets but will have a promoted title above them. Twitter by their own admission has been reluctant to introduce advertising because they wanted to take their time to find the least intrusive method. However, many tweeters have said they will no longer use twitter if they introduce advertising. It will certainly be interesting to see how this affects traffic levels on twitter. My opinion is if the frequency of ads served is low and they are relevant it should work very well from a business point of view.

The effectiveness of advertising will be measured by how often the promoted tweets are re-tweeted and favourited by tweeters. Companies will be able to advertise around topics which are trending as the most popular.

At the moment Twitter currently has over 100 million users and many internet advertising agencies and advertisers in general are keen to take advantage of this wide and varied audience. Traditionally social networks have found it difficult to monetise their audiences through advertising. Twitter has resisted the urge for fear of alienating its audience. The most successful campaigns which have utilised social networks so far have been meticulously planned by internet advertising agencies specialising in social media marketing.

The campaigns predominantly focused on creating profiles and groups with the aim of building a fan base virally through adding value through content/engagement in some way as opposed to the traditional method of straight display buys or CPC advertising.

The social network market has certainly become a crowded space in the US and UK. However it seems a convergence of traffic and battle for supremacy is on the horizon with Google vs Facebook being the title fight. Both of these giants are fighting to be the number one social destination. As a consequence ailing competitors such as Myspace who have continued to report falling ad revenue and traffic volumes are struggling to hold on. Also AOL who bought Bebo only 2 years ago for $850 million are considering a sell off or shut down.

Facebook continues to grow and so does twitter, but so far we haven’t seen a truly successful monetisation of a social network, one which is comparable to Google Adwords. The problem is once you start to aggressively intrude on users social real estate you run the risk of them upping sticks and finding a less intrusive network and there are many chomping at the bit. This has always been the fear and will continue to be so until a model is found, which means networks like Facebook and Twitter have to be very protective over their audience.

There is no doubt about it social networks are becoming more popular and at the moment there is no reason to think otherwise.