Thursday, April 15, 2010

Twitter's Ad Model; It's All In The Fraud Baby

It's taken Twitter a long time to get where they are, and knowing some of their backstory has made watching the journey from the outside quite entertaining. A few things haven't changed: Biz pontificates and paints the "Twitter is a triumph of humanity" picture (exceedingly well I might add), Ev leads the flock with jagged thinking & speaking, and Dick is the one saying "no guys, really, we need to focus and make some money, here's how we're going to try to do it; no more goofing off." Ryan Sarver has his head squarely around the outward facing platform implementation and needs; he's an asset. Jason Goldman... I still can't figure him out.

On Making Money
Dick's pitch was pretty good. The idea is that tweets themselves are the commodity. Rather than some new model in the system, e.g. a formal "ad," the Tweet structure as we know and love it today, will be the item that is bought/sold. "Promoted" tweets, as Dick kept referring to them as, will float to the top of distilled tweet pages (like search, or top tweets, or trending topics, etc). The "float" algorithm will be affected by 1) whether or not someone's paid for a tweet to float up and 2) whether or not it resonates with users. #1 is obvious and will result in a marketplace for pricing/bidding/buying/selling (ala Google's ad model). #2 isn't as simple (not that the former is simple to begin with).

Resonating
I argue that the dirty little secret on the network today is that current ad models on the web are a sham; a house of cards. We've all made plenty of money on the backs of click fraud, and it'll eventually collapse. Twitter's trying to "do it right" by influencing a promoted tweet's visibility based on whether or not a promoted tweet resonates with users. Whatever your platform, when money's involved, it gets gamed. Whether it's bots doing re-tweeting, clicking, forwarding, generating, whatever, the bots will do their thing. When bots can't do it, cheap humans will be employed to do the machine's bidding.

"If a promoted tweet doesn't resonate, it will go offline." That statement was spewed, in one form or another, over and over again by the Twitter crew. I love the idea as a user, but if Google had squashed ads that weren't resonating with users, they never would have had a business to begin with (and arguably they wouldn't have one now if they moved to this glorious idea). It's all in the fraud baby.

The chicken and egg problem Twitter faces with an ad model is that you need many producers to build a marketplace, yet you need the marketplace to draw the producers. If you do the righteous thing and only display ads that resonate with users, guess what, you won't have many ads to show. Though users would benefit, ad prices would be so high (both in cost and quality) that not many people will pay for them. As a result, resonance is de-emphasized in order to stoke the overall marketplace.

Traditional Internet ad models are fairly simple pyramids folks... the bottom many subsidize the top. Both in terms of quantity, in order for the marketplace to exist, and the dollars.

The picture Dick painted was a pretty one. As an end-user, the notion of only being exposed to "resonating ads" (errr "promoted tweets") is a treat. I hope Twitter can change Internet ad history and actually pull it off.

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