By Chadwick Matlin
Sunday, April 18, 2010; G02
More than a year and a half ago, Twitter had no idea how it was going to make money. And it wasn't even in the mood to pretend it did.
In September 2008, Twitter co-founder Biz Stone told me the company never met to hammer out a business model. No brainstorming sessions. No scribblings on a white board. No staff retreats to encourage blue-sky thinking. Those were the days when service could barely stay up for a week at a time. It was plagued by seizures; the entire site would go down for hours at a time, leaving only a cartoon whale in its wake. Stone and his team were far too busy combating the site's recurring problems to worry about how it would eventually support itself.
It appears that over the past year and a half, Twitter has managed to schedule a few meetings. On Tuesday, it announced and outlined its strategy to make money. It's brilliant.
That's not to say it's going to work. Just that it's innovative and integrated: Exactly what's needed to make an ad network logical. But that doesn't guarantee it will be profitable.
The centerpiece is Twitter's decision to mask its ads as actual tweets. Rather than seeing a big, glossy image advertising a Frappuccino, users will see a sponsored Starbucks tweet that hypes the latest Frappuccino flavor. It's admittedly a small difference, but it's one that allows Twitter to be true to the past three years of its development while setting a course for the next three.
Self-promotion is always what Twitter has done best. Professionals fill their feeds with links to their own work. Amateurs respond with mundane advertisements for themselves. Companies, threatened by all of this self-branding, have responded in kind. Some businesses have hundreds of followers; others have hundreds of thousands. No matter the follower count, every tweet is a shill.
Advertising, then, was always a part of Twitter, even when it wasn't. That Twitter's new ad platform is conscious of that narcissism is what makes it so promising. Twitter's actual ads (the ones companies pay for) will be in the feed with all the other ads you read all day (the normal tweets that people write free). They'll be at the top of your feed, with a little "Sponsored by . . . " alert at the bottom of them, so you don't think Starbucks has hacked into your feed. They'll be just like actual tweets -- just very expensive ones. They can be retweeted, replied to, linked to, etc. They are part of the Twitter ecosystem.
Of course, what that ecosystem looks like depends on the user. The Twitter ads will be least intrusive for people who use their Twitter feeds as news feeds. In that case, the Starbucks ad on Twitter serves the same purpose as the Starbucks ad on NYTimes.com. But if you use your Twitter feed as a way to stay up to date on friends' whereabouts and general minutiae, the advertisements will seem more incongruous.
Facebook has proved how hard it is to advertise against a social network. The concern is that if Twitter becomes too much of a social network -- and not enough of an aggregator -- it will run into the same problem. In the end, the same advertising principles that exist online exist offline. We're okay with advertising being in our newspapers, but not with billboards following us everywhere we go on a guy's night out.
But Twitter's ads might operate under different rules. After all, they are no different than the content next to which they are being served. We've seen this duplicitous model elsewhere on the Internet. Gawker's sites disguise some of its ads as blog posts. Digg's ads look like normal links and can be voted up and down, just like its stories. Both sites have made more money because of it.
Twitter is convinced the way it can make sure its ads work is by making sure they're "resonant." That word was all over Twitter's ad announcement, and it's sure to become a new buzzword for the Web. Twitter's general principle is that it's going to display only ads that users like -- the ones that resonate. It's great in theory, impossible to do in practice. If Starbucks is spending hundreds of thousands of dollars on Twitter ads but its Twitter ads are lousy, is Twitter really going to tell Starbucks to take back its money?
Twitter should forget about resonance and harp on authenticity. After speaking to Stone in 2008, I cobbled together a piece titled "Tweeter Pan." Back then, Twitter was afraid that if it grew up, it would also have to sell out. On Tuesday, Twitter finally figured out how to do one without the other.
Chadwick Matlin is the staff reporter for The Big Money.
-- The Big Money