Will Our Twitter Free Ride End or Will Targeted Advertising Subsidize Us?

by on September 12, 2009 · 11 comments

I really appreciate the venture capitalists (VCs) in Silicon Valley subsidizing my soapbox at Twitter.  Seriously, it is an absolutely awesome platform for getting a message out to the masses.  But at some point I worry that the gravy train will come to an end and that users will have to start picking up part of the tab.  After all, will those VCs continue to subsidize Twitter if it never turns a profit?  According to the Wikipedia entry about Twitter:

In total, Twitter has raised over US$57 million from venture capitalists. The exact amounts of funding have not been publicly released. Twitter’s first round of funding was for an undisclosed amount that is rumored to have been between $1 million and $5 million. Its B round of funding in 2008 was for $22 million and its C round of funding in 2009 was for $35 million from Institutional Venture Partners and Benchmark Capital along with an undisclosed amount from other investors including Union Square Ventures and Spark Capital. Twitter is backed by Union Square Ventures, Digital Garage, Spark Capital, and Bezos Expeditions.

Again, thank you VCs!  But, like them, I do wonder when and how Twitter will bring in some cash.  Is there a “freemium” model that could work?  Perhaps.  “Pro” or corporate accounts have been rumored to be in the works.  Getting someone else to pick up the tab that way might bring in enough cash for Twitter to allow the free ride to continue for the rest of us.  But what about advertising?  It’s been the “mother’s milk” of most online media and platforms for some time now, and Twitter seems perfectly suited to insert a few banner ads or contextual ads here and there.  It could be happening sooner than you think. Austin Modine of The Register notes in a new piece, “Twitter ‘Leaves Door Open’ for Targeted Ads,” that:

Twitter has always been reluctant to commit to serving advertisements as a revenue model – the way most web start-ups today stay afloat. In the past, the website has expressed more interest in developing add-on tools and services for companies and professionals. Yet [Twitter cofounder Biz Stone] … has never ruled out the possibility.

Modine reports that Twitter recently changed its Terms of Service in such a way that makes this more likely.  Here is what the new Terms of Service say:

The Services may include advertisements, which may be targeted to the Content or information on the Services, queries made through the Services, or other information. The types and extent of advertising by Twitter on the Services are subject to change. In consideration for Twitter granting you access to and use of the Services, you agree that Twitter and its third party providers and partners may place such advertising on the Services or in connection with the display of Content or information from the Services whether submitted by you or others.

As Tony Bradley of PC World argues:

Why not? Advertising is the grease that keeps the Internet revenue engine running smoothly. Its tried and true. Internet entities like Google have grown from the embryo stage to technology behemoth primarily by feasting on a steady diet of ad revenue.

Absolutely correct.  Of course, that probably won’t stop some people — especially the privacy zealots — from whining about commercial exploitation, mind manipulation, and so on — especially if Twitter really does make their ads highly targeted.  But that’s the natural evolution of things for Twitter and similar sites, and it’s very pro-consumer because it supports the continued provision of service at no charge to the vast majority of users. That’s especially important for a communications platform like Twitter, which carries a massive amount of non-commercial speech, as Berin Szoka and I pointed out in our papers,Online Advertising & User Privacy: Principles to Guide the Debate,” and “Targeted Online Advertising: What’s the Harm & Where Are We Heading?  It’s essential that policymakers not interfere with the evolution of business models that could support speech-enhancing platforms like Twitter going forward.  This is why we always point out the relationship between economic regulation and speech regulation. Burdensome regulation could stifle the “technologies of freedom” like Twitter and diminish our speech opportunities in the process.

  • http://www.screensleuth.com/ Screen Sleuth

    I'm sure Twitter will be targeted by advertising in some form soon…it's the fate of all popular venues visited by millions of people.

  • http://www.aheram.com Jayel Aheram

    Twitter can then provide an advertising-free subscription service (it worked with Flickr) to placate those who do not like the advertising. If given the choice, there are some people will pay to not be subjected to advertising.

  • http://techliberation.com/author/berinszoka/ Berin Szoka

    Amen, Jayel. In many cases, I'd probably be willing to pay at least as much as the advertising is worth to the website operator. But if many websites don't do this, it's probably not because the site operators just like to annoy you, but because there just isn't enough demand for the ads-free “fremium” version to make it cost-effective to offer that in addition to the ad-supported version. Not having that option may annoy us even more than the ads, but, hey, life is tough—especially for the entrepreneurs who have to try to make a living and show a return on investment sufficient to justify the risks venture capitalists take on web start-ups.

  • quanticle

    I, for one, wouldn't mind more targeted advertising from Twitter, if they simultaneously acted preemptively to forestall the growing spam problem. The number of spam accounts touting generic prescription drugs and various get-rich-quick schemes has been growing exponentially of late, and I'm wondering when they'll place a noticeable load on Twitter's servers.

  • http://techliberation.com/author/berinszoka/ Berin Szoka

    I hear you, Quanticle. But keep in mind that sites like Twitter have a strong incentive to fix the problem of spam—especially as they increase their reliance on advertising. Why? Because every time you see a piece of “spam,” you become just a little less likely to pay attention to tweets in general. In short, the irrelevance of spam increases ad blindness, diminishing the attention likely to be paid to advertising—and therefore click-through-rates and, in turn the effectiveness of advertising for advertisers and its profitability to publishers.

    I'm not saying this is a silver bullet. There are no silver bullets! But this incentive does mean we should be a little more optimistic that Twitter will address the problem now that it's venturing into advertising.

  • quanticle

    Indeed. There's also the fact that spammers will be in direct competition with Twitter for the attention of Twitter subscribers. Given that the attention of Twitter subscribers is limited, every second of this attention that goes to spammers is one second that Twitter doesn't get. I think this is another reason we'll be seeing a crackdown on spam shortly.

  • quanticle

    Indeed. There's also the fact that spammers will be in direct competition with Twitter for the attention of Twitter subscribers. Given that the attention of Twitter subscribers is limited, every second of this attention that goes to spammers is one second that Twitter doesn't get. I think this is another reason we'll be seeing a crackdown on spam shortly.

  • quanticle

    Indeed. There's also the fact that spammers will be in direct competition with Twitter for the attention of Twitter subscribers. Given that the attention of Twitter subscribers is limited, every second of this attention that goes to spammers is one second that Twitter doesn't get. I think this is another reason we'll be seeing a crackdown on spam shortly.

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