Especially in business and financial situations, it's imperative to know whether the person or company with whom you're interacting is actually who you think it is. For this reason, Twitter verifies accounts, and it's why Baidu (NASDAQ:BIDU) rolled out its verified ad account program last summer. Facebook (NASDAQ:FB), too, has begun verifying its high-profile accounts.
Verification has its advantages for these sites. It provides their large user bases with faith in the platform and makes the product more sticky for those accounts that do get verified.
Baidu's +V Initiative
Baidu began vetting its advertisers in the second half of last year to ensure that they are legitimately licensed businesses. Baidu provides advertisers with plenty of incentives to get verified, or rather disincentives for not getting verified. Accounts that don't get verified will receive poor ad placement, fewer format options, and will have to pay more to advertise.
Baidu's focus is clearly on quality advertisers. If the company's search results are overrun by Internet scams, web users will be more inclined to look for an alternative search engine.
As a result of the +V initiative, Baidu's customer base fell 1%, sequentially, in the third quarter last year to 464,000 active advertisers. Those advertisers are, however, spending more. Average ad-spend was up 19%, sequentially, that quarter.
The short-term impact of the +V initiative will likely be offset by a growing average revenue per user, or ARPU. Legitimate businesses are generally larger operations with bigger advertising budgets, and web searchers are more likely to click on ads from companies they recognize and, therefore, probably have more confidence in.
They are who we thought they were
There are no incentives for Twitter verification, and you can't apply. The same is true for Facebook. There may be some slight prestige, or a feeling of accomplishment, that comes with the tiny blue check mark, but besides that there's not much to be gained.
The verification process is used to legitimize the network. This makes users confident in Twitter and, to a smaller degree, Facebook, as a means to reach out to celebrities and reporters and to initiate a conversation.
Promoting conversation is a high priority for sites like Twitter and Facebook. More posts and more time spent on the site means more advertising opportunities. Ongoing conversations also bring users back to the site multiple times per day, so Twitter and Facebook are given better insights into a user's behavior.
Moreover, the verification process can give confidence in advertisers. If an advertiser wants to target journalists, for example, verified journalist accounts may be a quick, easy, and effective way to target its audience. As a result, social networks can increase their ad rates as ads become more effective and easier to implement.
Losing its cool
Twitter verification isn't what it used to be, though. Although there are still thousands of people begging to have their accounts verified, there's a growing number of people rebuffing Twitter's verification request. A lack of incentive means that Twitter will have a harder time getting some of its users to verify accounts that could be valuable for its network and advertisers.
This is where Baidu holds an advantage. Since it's dealing with paying customers, verification is a step advertisers are, essentially, forced to take in order to use Baidu's platform. As a result, verification at Baidu will likely never face the same dwindling demand for verification as Twitter.
Two products, the same goal
Baidu's search engine and Twitter's social network don't have too many similarities. Both facilitate online marketing, but the way it's delivered is significantly different. Even their verification platforms are dissimilar.
Yet, verification ultimately leads to the same end goal for each company -- an improved user experience. Focusing on product over monetization is a winning formula for Internet companies, and it often pays off in the long run.
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Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Baidu, Facebook, and Twitter. The Motley Fool owns shares of Baidu and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.