Twitter Rents Itself Out -- Selling to Come Later

Twitter has begun inserting promotional messages into the stream of tweets that users see. Instead of selling itself out, the company has decided to experiment with renting.

It's not remotely close to Armageddon, but as Twitter expands the commercial messages it delivers to customers -- as it must -- it has to hope that tens of millions of consumers can reconcile themselves to the change. Which may not happen.

The lack of money trap
What, Twitter has to make money? Given its history, you could easily have gotten the idea that it wasn't too concerned about generating revenue. In fact, Twitter's backers got downright irritated at facing constant questions about when and how the company planned to actually pay its bills.

Twitter's VCs got cranky because the company was following a venture-blessed business approach: first get the customers and then figure out how to make money from the relationships. And that's fine, except that startups like Twitter need to start thinking about "monetization" early on. Even if they turn out to be the wrong choices, failing to address the question from the start means that a company -- again, like Twitter -- could set up an eventual collision between what its users expect and its ultimate hoped-for revenue sources.

It's for your own good
Twitter is trying to put a good face on expanding its promoted tweets program, trying to spin it as a service for customers:

We all come to Twitter to connect with the latest information on the topics and people we care about. So when we decide to follow a favorite brand, business or charitable organization, we expect to be among the first to get a special announcement, access to exclusive content or a great offer.That's why starting today, we're introducing a way to ensure that the most important Tweets from the organizations you follow reach you directly, by placing them at or near the top of your timeline. These Promoted Tweets will scroll through the timeline like any other Tweet, and like regular Tweets, they will appear in your timeline just once. Promoted Tweets can also be easily dismissed from your timeline with a single click.

That's what I mean about renting. Twitter realizes that it has an existing dynamic with users. Disturb it too much and you might send them elsewhere -- like to Facebook or -- who knows? -- maybe Google+.

Still mostly cool and non-commercial
So Twitter is doing this half-way. A customer must already follow a company or organization to see an ad. A promoted tweet will appear only once and then scroll out of the way. But this won't satisfy advertisers for long. The messages become ephemeral, with no chance of creating repeated impressions on customers. Twitter can't guarantee that even followers will see an ad.

And what about all those people who don't follow organizations at all? Management wants everyone to see ads and make some money for the company. Although Twitter can still attract investment money, that money want to see returns. There's a reason that the co-founders who once didn't want ads on the service are now all gone.

The realistic and reasonable need to create revenue to eventually pay back investors collides with the very nature of Twitter: an ephemeral stream of messages, most of which are never seen by the people they are, in theory, targeting. To continue in business, Twitter will have to make the ads more obvious, longer lasting, and less avoidable. Of course, doing so might easily repel the users it needs in the first place.

Related:

• Biz Stone Quits Twitter -- the Last Co-Founder to Go
• Facebook Versus Twitter Is Really Business Model Versus Technology
• Twitter's New Ad Model Is Way Too Subtle
• Another Look at Tumblr: More Users, but Its Business Model Is Still Iffy
• Time for Twitter (and Others) to Face Business Reality

Erik Sherman

Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.

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