How Twitter is going to make real money

By Reggie James, managing director of Digital Clarity.

Speaking at the MIXX Conference at Advertising Week on Tuesday, Former Google executive Dick Costolo, now COO of Twitter, outlined their approach to monetising the micro blogging platform.

It’s a question which has been doing the rounds for some considerable time – would it be possible for Twitter to turn its huge growth and popularity into the mountains of cash that Google has generated?  When would there be a social networking advertising platform to compare to Google’s success in the search market?

Unlike Google, which built their ad revenue streams by selling to thousands of advertisers before approaching big brands, the Twitter approach appears to be to start at the top by courting the biggest brands and their Advertising Agencies.  The big question is what have they got to offer?

Twitter has already launched Promoted Tweets and Promoted Trends, and to add to this, Costolo talked about the arrival of Promoted Accounts, where advertisers will pay Twitter to suggest their feeds to users with similar interests – seems they are enabling brands (and individuals) to promote their content, rather than merely advertise.

This certainly fits with a further point he went on to make; that Twitter places a heavy emphasis on user experience and it would be unethical to take advantage of its massive reach just to drive traffic to advertisers.

Maximising near-term revenues were not important, he said, adding that brands were already queuing round the block to advertise with Twitter.  There’s no reason to disbelieve him.

With these ad services in place, Costolo predicts that Twitter's advertising revenues will increase at a similar rate to those of Google and Facebook.   That’s certainly been given extra weight by Google CEO Eric Schmidt, who speaking at TechCrunch Disrupt on the same day said that, “Twitter should be able to come up with advertising and monetization products that are very lucrative.”

The key to Twitter's growth, though, will come when they release a self-serve model in 2011, aimed at businesses of all sizes and types.  So, if ever there was a time for brands to put doubt and inexperience to one side and focus on social media, it’s now.  

Once Twitter opens the door to promoting entire accounts, savvy campaign managers will be able to buy relevant traffic on demand.  And given the general tendency of twitter users to follow others based on topic and interest, rather than making friends, Twitter should be able to offer advertisers a high degree of relevance.