Twitter’s promoted products begin to deliver results

Twitter is finally beginning to grow into its advertising-based revenue model in the long, convoluted journey to monetisation. The company launched “Promoted Tweets” back in April and they’ve slowly started percolating through the Twitter ecosystem. Finally it seems that the paid-for tweets model is maturing into a healthy and robust revenue stream for the micro-blogging site which has just been valued at US$3.7-billion.

At last month’s Web 2.0 Summit in San Francisco, Twitter co-founder Ev Williams described the model as doing “better than we’d expected”, but more importantly, that “the math looks good”.

Twitter’s promoted suite of products is three-pronged, comprising Promoted Tweets, Promoted Trends and Promoted Accounts.

1. Promoted Tweets: Ordinary tweets that advertisers pay to highlight to a wider group of users
2. Promoted Trends: Users see time-, context-, and event-sensitive trends promoted by advertising partners. These paid promoted trends appear at the top of the “Trending Topics” list on Twitter and are clearly marked as “Promoted.”
3. Promoted Accounts: These form part of the “Suggestions for You” widget which suggests accounts that people don’t currently follow and may find interesting.

The most common form of promoted tweet is when an advertiser buys a search term. According to Twitter, some promoted offerings, such as Promoted Trends, are priced a fixed rate, while others use a simple impression-based pricing model. Twitter is still developing that model with its initial advertising partners by measuring multiple indicators of engagement, such as: Retweets, @replies, use of hashtags, avatar clicks, in-tweet link clicks, views after retweet, and more.

They are calling these collective indicators “Resonance” and believe that over time, a pricing model based on resonance will be better tuned to the actual value of promoting a Tweet than simple cost-per-click or dollars-per-follower models.

Jumping on this bandwagon have been some big players. During the World Cup this year Coca-Cola bought the #WC2010 hashtag. Most recently American retailer Target bought #BlackFriday and mobile giant Verizon Wireless bought #CyberMonday, although it now looks like those two hashtags have been bought by TheOutNet.com.

Interestingly, HP has bought the #Apple tag, which leads to some intriguing questions about ownership of brand terms in the ecosystem. Buying a competitors’ hashtag will put your brand’s promoted tweet at the top of the results timeline. Google Adwords has been doing this successfully for a while. Bidding on your competitor’s search terms is commonplace. For example, Apple might buy the term “Blackberry Playbook” and then push iPad advertising to those pages.

Clearly, bidding on hashtags and buying promoted tweets is doing well, because Williams claims that there’s “way too much demand for the supply”.

However, questions have been asked about the integrity of the trending algorithm. Twitter has been accused of manipulating the Wikileaks trend recently, although it denies these claims. Twitter spokesperson Carolyn Penner rallied against these cries by stating on Twitter’s blog: “This week, people are wondering about WikiLeaks, with some asking if Twitter has blocked #wikileaks, #cablegate or other related topics from appearing in the list of top Trends. The answer: Absolutely not. In fact, some of these terms, including #wikileaks and #cablegate, have previously trended either worldwide or in specific locations.”

However, it is already a known fact that Twitter has manipulated the algorithm to stop the constant presence of Justin Bieber in the trending topics. No one is complaining about that one.

Despite this lack of integrity in the trending algorithm, would your company consider buying a hashtag? Is this finally the advertising-based revenue model Twitter has desperately been seeking, or will promoted tweets irritate the user base and spam our timelines? Give us your thoughts in the comments.

Here’s the full Web 2.0 Summit interview with Ev Williams, thanks to O’Reilly Media: