What Do Twitter’s Ads Mean For You?

Ever since Twitter took off after winning a Web award at the SXSW show in 2007, people have been wondering how it’s going to make money.

There was talk about creating special Pro accounts and charging businesses for extra features.

The company picked up some cash from Microsoft who sponsored ExecTweets, a page of tweets posted by leading executives.

And it earned a lot more by making deals with search engines to include its real-time content in search results.

None of that though was going to justify the $150 million the company is said to have picked up from investors.

That was only ever going to come from advertising. And now we can see how it’s going to work.

Twitter co-founder Biz Stone has announced that “promoted tweets” will be placed at the top of Twitter’s search results. Search for “Starbucks” for example, and you can see a tweet about a day in Starbuck’s cupping room, complete with a link to a picture on Yfrog. The tweet has already been retweeted more than a hundred times, and the image has been viewed over 4,000 times.

That’s a good sign for Starbucks because Biz Stone also made clear that promoted tweets that don’t get user interaction will stop being shown.

But many of the clicks and retweets that Starbuck’s ad received are likely to have been the result of curiosity: people are searching to see how the new ads look. Twitter isn’t Google, and search is only a small part of Twitter’s functions. The site’s Web users, the only people who can see the ads at the moment, also make up only a small part of the Twitter community. About three-quarters of Twitter’s traffic comes from third-party programs like TweetDeck and Tweetie (which is now owned by Twitter.)

As things stand, individual publishers can’t earn from these promoted ads. Users like you and me have to use services like SponsoredTweets.com to earn from ads in timelines. In the future, we’re told, when the ads start appearing on third-party programs, the developers will receive a 50/50 share of revenue. They’ll also be pushed out to users’ timelines.

But there’s been no mention (yet) of twitterers making money out of promoted tweets (and even advertisers are limited to a few key brands.)

For now then, the most important feature for Internet entrepreneurs of Twitter’s promoted tweets isn’t how we can make money out of them. It’s the way they’re being implemented.

The people at Twitter could simply have put ads right across the site and watched the money roll in. But they’re being cautious. And clever. They’ve put out a few ads in one place, and they’re watching the reaction.

They’re doing the kind of careful testing that every business needs to do as it launches a new product.

Exactly the same principle applies to implementing your AdSense units, your information products and your new websites. The value and importance of testing doesn’t stop because your business has grown or because your idea looks good.

If Twitter still feels it needs to test, it means that you still need to test too.