Twitter executives shed some more light on its revenue model and its first attempt to inject advertising into its service today at its Chirp conference. COO Dick Costolo explained Twitter’s new advertising product, Promoted Tweets, and ensured the audience that Promoted Tweets will eventually be available to anyone with a Twitter account, not just the handful of early partners it is launching with. He also revealed that developers who show Promoted Tweets in their apps will get a 50/50 revenue split.
CEO Evan Williams voiced some frustration with the constant questioning of why Twitter is still looking for how it will make money. “As much as we want to tell people to shut the hell up, it’s important,” he acknowledged. But it is not “like we haven’t checked the couch cushions and there might be business model there.” Rather, Twitter has been taking its time to roll out its business mode to make sure it is part and parcel of the product. “The revenue portion of Twitter becomes a significant feature,” he says.
Williams elaborates: “There are lots of ways to make money, if you have a lot of traffic. It is kind of a solved problem. We want to make more money than a short term opportunity provides. We want a business that is organic to the product itself.”
The first phase of that will be Promoted Tweets, which act just like regular Tweets and go everywhere regular Tweets go. They can also be retweeted, replied to, favorited and so on. “It didn’t take long to conceive of,” says Costolo. “It had to be organic, and had to be a monetization that went everywhere the tweets went.”
Promoted Tweets will be sold on an impression-basis at first (CPM), but will quickly be priced on an ROI-basis using Twitter’s new “resonance” metric, which is like a quality score for Tweets. Resonance takes into account how much a Tweet is seen, retweeted, favorited, and other actions. Once Twitter understands resonance, which Costolo admits they don’t yet fully grasp because the program has just launched, then the pricing model will quickly move away from a CPM model.
Promoted Tweets were designed as a new feature, as a special kind of Tweet. But as Costolo says, “You can do everything to a promoted tweet that you can do to a regular tweet.” Whether or not it it is really a feature and not just another set of intrusive ads will depend on whether users actually interact with them.