Twitter Unveils Plans to Draw Money From Ads
Twitter will unveil on Tuesday a much-anticipated plan for making money from advertising, finally answering the question of how the company expects to turn its exponential growth into revenue. — The advertising program …
Context & Ripple Effects
Twitter's advertising launch resolves a question that had been hanging over the service's growth, after a history of unfulfilled monetization plans. It also marks a break with Twitter's 2009 emphasis on revenue from tools rather than ads, while the company is tightening control over an ecosystem of outside applications.
First-order effects
- Twitter gains a direct revenue channel from advertisers, while users begin encountering ads in the service.
- Outside developers face a platform owner with a clearer financial incentive to control the parts of Twitter where advertising appears.
Second-order effects
- Advertisers can test Twitter as a paid communications channel, creating pressure for the company to define which user activity and placements it can sell without disrupting the service.
- Twitter's developer tensions become commercially consequential: application makers depend on access to a service whose owner is aligning product decisions with an ad business.
Third-order effects
- If advertising becomes Twitter's primary business model, the service is likely to evolve from an open application platform toward a more centrally managed distribution and monetization system.
- The move is an early test of whether fast-growing social services can convert audience attention into revenue while preserving the third-party ecosystem that helped expand their reach.
The trend: Twitter is shifting from experimentation with tool-based revenue toward advertising embedded in the core social service.