Twitter decides to sell advertising

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The microblogging site ruffles feathers in its pursuit of cash

CAN Twitter make money? That simple but vital question has dogged the microblogging service since its birth three years ago. Now Twitter is out to prove that the answer is yes. On April 13th it unveiled a long-awaited advertising scheme that it claims could mint money for the company. The next day at Chirp, Twitter’s first conference for firms creating software and services on its platform, Evan Williams, its chief executive, argued that the new initiative would benefit Twitter’s entire “ecosystem”, including its 106m registered users.

It needs to if Twitter is to become a commercial hit. The company has long concentrated on scooping up users for its service, and money from venture capitalists—its latest funding round valued it at $1 billion—rather than on finding a way to make profits from its burgeoning audience. Now it needs to show that its whopping valuation is justified while protecting the independent network that has already produced most of the 100,000 Twitter-related applications, or apps, currently available.

Some social-marketing experts claim that the nature of Twitter’s service, which involves communicating via 140-character “tweets”, makes it tricky to monetise. Twitter’s bosses disagree, but are treading carefully. For now, they are only letting advertisers such as Starbucks and Virgin America, an airline, place so-called “promoted tweets” at the top of results lists on the service’s search engine. This is similar to Google’s sale of ads based on keywords in searches. All of the promotional tweets will be subject to a “resonance test” that measures, among other things, how often they get a reply or are forwarded to other users. Those that are not popular with Twitter’s users will be removed.

Twitter says it wants to see how successful this approach is before it moves to the next phase of its plan. This will involve rolling out promoted tweets to third-party apps and posting them next to individual users’ tweets. Alarmed at this prospect, some users have already urged Twitter not to “pollute” their thoughts with ads and have threatened to leave if it does. Yet unless there is a mass revolt in the coming months, it is almost certain to press ahead.

Could this be a massive money-spinner? Sceptics point out that ads on Google command premium rates because its users are often looking to make a purchase. Twitter’s audience, they say, is less likely to be shopping, and will thus be less prized by advertisers. Dick Costolo, Twitter’s chief operating officer, disputes this, arguing that people often use it to search for, say, immediate reactions to product launches.

Nonetheless Twitter is hedging its bets. It has already signed deals with search engines such as Google and Microsoft’s Bing that let them integrate tweets into their search results. And it is developing analytical products to sell to companies that are keen to track how they are perceived in the Twittersphere. It will no doubt come up with other ways to make money, too.

A few of these may compete with offerings from developers. There was some squawking at Chirp about Twitter’s recent purchase of Atebits, the maker of Tweetie, a program that lets people manage their tweets from iPhones and Macintosh computers. Makers of rival programs complain that Twitter is now competing with them. “The way they have done this is scary,” says Loic Le Meur of Seesmic, an app developer. “We could have signalled our intentions better,” Mr Williams concedes.

Computing history is littered with examples of firms, including Microsoft and Apple, which have added features to their products that smaller firms once provided. Twitter is trying to minimise developers’ fears by being clearer about the areas it might one day dabble in. It could also soothe them by offering them a generous share of revenues if it extends its advertising platform to their apps.

All this matters because Twitter’s rivals have built powerful ecosystems of their own. Next week, for instance, Facebook is holding its own jamboree for developers, f8, at which it is expected to unveil rich new data sources that they can use in their apps. It is likely to make it even easier for people to establish connections with other websites and to pull information from elsewhere back into Facebook. With such a formidable foe, Twitter needs all the friends—and advertisers—it can get.