I have read much commentary on my Twitter stream (ironically) and in the press about how investors are going to abandon investments in the Twitter ecosystem because they seem to appear hostile to ecosystem partners. Let me be the first to say that I don’t agree with this notion.
Let me explain.
1. Regarding protecting the quality of the stream from an influx of low quality advertising, I emphatically agree with (what I perceive to be**) Twitter’s positioning. I could not do justice to Ad.ly’s own response, which is wonderfully put forth in this article by our CEO, Arnie Gullov-Singh. If you want to understand what the company believes about Twitter’s positioning please read the linked article.
Despite the criticisms they’ve received, Twitter’s desire to maintain the quality and integrity of the Twitter stream is worthy and will benefit both the platform and all of us as individuals who have poured our time and energy into communication through Twitter
2. The position that Twitter should be compensated by third-party applications that monetize through Twitter is both correct and is actually great news for the long-term viability of the ecosystem. For any platform to succeed it needs to achieve revenue momentum. Why should any of us expect a free ride? Our success as businesses that hope to build a strong ecosystem and prosper as 3rd-party apps depends on Twitter’s success. Just ask Zynga where they’d be today if Facebook wasn’t building a hugely profitable platform.
3. Furthermore, when Twitter publishers make money from their work in supporting the Twitter platform this is good news for all involved. Let’s face it, if people want to blog as a career they have to be able to make money. If people want to cultivate a following on Twitter they, too, need to be able to be compensated for their efforts. This is good for Twitter as well. They don’t want to ever wake up and hear their users saying their moving on another platform where they can make more money as Lady Gaga’s manager does here about MySpace. By embracing high-quality in-stream ads Twitter will help foster its own ecosystem of publishers and advertisers.
So I believe that Twitter needs to come up with a plan to maintain the quality of any in-stream advertising. While Ad.ly and others were formed on the basis of taking the high ground we know that over time other companies will not. We share the goal of helping Twitter to maintain a quality platform.
Some other thoughts from me for Twitter
- Denoting third-party ads as a separate color on Twitter.com would add to transparency for consumers. This would make advertising even more visually transparent.
- Offer a premium “advertising free” offering to consumers who prefer an ad-free stream. If they charged just $2 / month and if they converted just 5% of their user base this would add more than $40 million in profits to Twitter’s bottom line. This would benefit everybody and offer consumer choice. And it supports my goal of making Twitter a healthy economic ecosystem and one that can rival Facebook’s as an engagement platform for audiences and brands
- Establish clear guidelines on advertising quality scores. There are many ways to implement this but one idea is to judge based on a combination of unfollows, Retweets, CTRs or third-party evaluations based on subjective spot tests. This would be no different that Google’s having quality scoring
- Establish a clear policy of revenue sharing. This can evolve over time but laying the foundation with clear pricing statements would help third-party developers plan better. For ad-networks this can be a simple revenue share as is customary in more traditional online media. For other developers there might be consumption-based pricing. Having a clear rate card (as Apple, Salesforce.com and others have) would help alleviate concerns. Saying “you’ll figure it out” isn’t good enough for the commercial stage of Twitter’s business. If I were them I’d hire some ex Salesforce or Intuit folks who could help with this. They’re masters at the games of pricing, segmenting offerings and marketing to customers.
As a user I remain bullish on Twitter as a platform. Having seen the economics of a Twitter application firsthand, I am even more bullish as an investor.
** Note: When Twitter acquired Tweetie and launched a BB application I stated that I thought both moves were fair and were correct but that they could have done a better job at PR in selling these to the ecosystem. The same is true for this latest announcement. I actually think that Twitter is doing a great job of navigating the tough waters of moving from a free ecosystem to a commercial one. I just think they should hire an experienced Chief Marketing Officer (I don’t think they have one?) who would get out in front of the news cycle on stories and make sure all communications [and pricing plans] were thought through before announcements.
(Cross-posted @ Both Sides of the Table )