How Twitter Found Its Money Mojo
J Thoendell stashed this in Tech
While Weil and Roetter were honing the system, Bain was going on a months-long tour of potential customers, visiting around 140 chief marketing officers of major companies. “It was tough for Adam and his team,” says Costolo. “There was a lot of education work to do. Customers wondered why they couldn’t move over their search ads. We would say, just take one of your tweets that you know is already good because people are engaging with it, and you can promote it!”
One advantage that Twitter had was that businesses were already taking advantage of Twitter — they just weren’t paying for it. “Most of the big brands were already here,” says Bain. “Our opportunity was to take this activity, maybe it was mostly in customer service, and figure out how to redirect it into a marketing opportunity.”
Bain recalls visiting the headquarters of a major airline where the CEO spoke of how much they’d invested in using Twitter as an alert for customer complaints. When Bain asked for more details, the CEO took him to another building. “It was like a scene from James Bond,” says Bain. “You open the door and instead of people doing karate moves or whatever, you had a massive sea of customer service people on the phone. He said there a ton more of these overseas. Look at this sea of investment.” So Bain’s job wasn’t selling Twitter, but convincing advertisers that promoting ads could do more for them.
So how is Twitter making its money?
The obvious answer is advertising — those “Promoted Tweets” that appear unbidden in a user’s timeline. Getting there wasn’t easy. And it takes effort to understand how those ads work. But in contrast to the well-documented turmoil in the company throughout its history, the road to revenues for Twitter has been a steady, coherent, patient and innovative path. And more recently, the company has embarked on a strategy to go beyond those ads to make money from selling products directly, and even monetizing people who don’t use Twitter.
Evan Williams said:
I always joked that the press reported as if we were looking for a business model that we lost somewhere — maybe it’s under the couch, where is the business model? But no one has ever built a consumer Internet thing that reached scale that they couldn’t earn money on.
The answer seemed so simple that it is now impossible to imagine otherwise. The ad would be a tweet.
The person probably most responsible for this concept was Anamitra Banerji, an early Twitter employee who had brainstormed Twitter’s ad strategy and got things in motion even before Weil’s team began building the final system. In November, 2009, he’d presented a long memo to Twitter’s leaders outlining a road map for Twitter monetization, including some dummied-up sponsored tweets.
“Now it seems obvious, but back then it was not obvious,” says Weil. “People said why don’t you just throw up AdSense on the side of the page and make a bunch of money? But we needed to build something that felt like Twitter. We didn’t want to build something where we knew the ads weren’t very good, so we’ll shove them over to the side of the page and maybe you won’t hate them that much.”
Even now, Costolo marvels at the simple genius of the approach. “An ad can go everywhere tweets go because it’s just a tweet,” he says. “You can do anything to it that you can do it a regular tweet, and we could actually use the signal from how many favorites and replies and re-tweets it gets as a way of thinking about how much farther to broadcast the ad, the Promoted Tweet.”
Only later did another huge advantage of dropping the distinction between a tweet and an ad emerge: the approach allowed for a seamless transition to mobile. (About 80 percent of Twitter use is now on mobile devices.) “Promoted Tweets fit naturally within the product, wherever it goes,” says Weil. “Everybody else had a struggle when they switched to mobile. But we were already there.”
Also, because ads would literally be tweets, they would instantly take advantage of any improvements that Twitter made in its general experience — like more prominent photos, videos, Vines, and app downloads (the latter has become a huge source of income in recent months, as developers consider Promoted Tweets on a par with Facebook as the best way to get appropriate customers to consider their apps). “Promoted tweets instantly get the same superpowers, which is nice,” says Weil.