Twitter Finds Its Business Model?

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A business model has finally started to chirp at Twitter.

The popular microblogging site introduced Promoted Tweets this morning, letting sponsors pay for keyword placement in the site's search results. At least, that's how it will begin.

Twitter has lined up serious A-listers for the new advertising program, including Best Buy (NYSE: BBY  ) , Red Bull, and Starbucks (Nasdaq: SBUX  ) . I tried to bait an ad -- searching for "3-D TV" and "coffee" to see whether Best Buy or Starbucks would pop up -- but I came up empty.

There probably won't be any backlash over this phase of Twitter's monetization. If someone is searching for something, targeted search results bankrolled by an advertiser have long been standard on most engines. I'll be more intrigued to see what happens when Twitter tries to wedge these Promoted Tweets into individual users' personalized feeds.

"Before we roll out more phases, we want to get a better understanding of the resonance of Promoted Tweets, user experience and advertiser value," explains co-founder Biz Stone in this morning's blog entry. "Once this is done, we plan to allow Promoted Tweets to be shown by Twitter clients and other ecosystem partners and to expand beyond Twitter search, including displaying relevant Promoted Tweets in your timelines in a way that is useful to you."

This second phase will be crucial for Twitter. Will Twitter hold up when ads start sneaking into users' feeds?

We can hardly blame Twitter for trying to cash in. Ad-free Wikipedia and Craigslist may cultivate an altruistic allure, but in the ever-fickle dot-com world, Twitter would be blowing a golden opportunity if it declined to cash in on its current popularity.

More than 22 million unique visitors hit last month, according to traffic watcher comScore. The site has already licensed its real-time tweet results to Google (Nasdaq: GOOG  ) , Microsoft (Nasdaq: MSFT  ) , and Yahoo! (Nasdaq: YHOO  ) , making online advertising is the next logical step.

Will Twitter soon jump the shark in 140 characters or less? I don't think so. In moderation, targeted ads provide a sound strategy. If anything, this new development should start making traditional search engines nervous. A financially motivated Twitter could be a fierce competitor.

What do you think of the arrival of online advertising on Twitter? Share your thoughts in the comment box below.

Best Buy and Microsoft are Motley Fool Inside Value picks. Google is a Motley Fool Rule Breakers selection. Best Buy and Starbucks are Motley Fool Stock Advisor recommendations. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Best Buy. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz has been twittering from his @market account since the early Twitter days, but he's still not entirely convinced of its staying power. He does not own shares in any of the companies in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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  • Report this Comment On April 13, 2010, at 3:41 PM, militauro wrote:

    "Once this is done, we plan to allow Promoted Tweets to be shown by Twitter clients and other ecosystem partners and to expand beyond Twitter search, including displaying relevant Promoted Tweets in your timelines in a way that is useful to you."

    The best they can do is hide it in a way that doesn't quite get in the way. Any "promo" or "ad", to most consumers like myself, has no usefulness. Adding these into my personal page is just going to frustrate me and several others. I understand they need to monetize their site, I just don't like how ads are always put forth as a "service" to the user as opposed to keeping it real on what it ad that is useful to them.

  • Report this Comment On April 14, 2010, at 2:23 PM, pondee619 wrote:

    So, my searches will result in the highest bidder for my eyes rather than the best match for my search?

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