Just over a week ago Twitter finally started to clock on its transition to a public company.
The company announced, via the medium of tweet naturally, that it had filed the necessary paperwork with the Securities and Exchange Commission in New York to start the IPO process.
Google still commands 41% of total digital advertising in the US
At this stage details of their pitch to potential investors is still under wraps.
Based on what we have heard from CEO Dick Costolo in the past, and the recent experience of anyone using the platform, the revenue model is highly likely to be focused on advertising.
Your Twitter stream is about to get disrupted
Recent to changes to the API that allows developers access to the Twitter ‘firehose’ confirms as much. It is much harder than it used to be to avoid sponsored tweets.
It is the same route to maturity that Facebook and many others in the social media world have taken. And it makes some sense.
They have detailed user data that can be sold to advertisers and used for targeting, and there is a lot of advertising money still to make its way to the digital world.
The lazy solution
Approximately 30% of our time is spent online but digital only commands 20% of total advertising budgets. That is a $13 billion (£7 billion) deficit.
Still, doesn’t it always feel a bit like the lazy solution?
It all started with Google, but for them advertising made sense for a specific reason.
When you search, advertisers know exactly what you are looking for. What is more, they only have to pay when an interested party clicks on their ad!
It is such a compelling idea that Google still commands 41% of total digital advertising in the US.
Yet I’m not sure Facebook and Twitter, for all they think they know about us, can offer the same compelling proposition.
Facebook thinks I am a single bodybuilder with aspirations to become a welder for a living.
Intrusive advertising ruins social platforms
And of course Facebook, Twitter and others like Instagram and Tumblr have to tread very carefully with their advertising so as not to alienate their users.
Fundamentally, they are just not forums in which we naturally consume advertising. It like a hawker coming into your home to sell fake dvds when you’re trying to host a dinner party.
Fundamentally, they are just not forums in which we naturally consume advertising
At some point a successful social site will ruin its property with intrusive advertising.
And without a visible alternative, it will start a spiral that will seriously curtail the flow of investment to social sites until a new revenue model is developed and proven.
Time to get creative
For all they may start with purer motives, social media firms are pragmatic, or meglomaniac enough to realise that a free pass only lasts so long.
If not to reward investors, revenues are at least necessary to fund your long term vision.
They must get more creative with their revenue ideas, weaving them into the fabric of their proposition to users.
Until they do, investors at any stage face a serious risk.
image credits: wikimedia/fotopedia commons