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Twitter gives the lowdown on its new business model

The company says it will split the revenue from Promoted Tweets 50-50 for third-party apps

By , IDG News Service
April 14, 2010 10:21 PM ET

IDG News Service - It's been a long time coming but a Twitter executive gave the first in-depth look on Wednesday at how the microblogging service plans to make its money.

There will be two "pillars" to Twitter's business model, Chief Operating Officer Dick Costolo said at the company's Chirp developer conference in San Francisco. The first, announced earlier this week, is Promoted Tweets, which lets advertisers pay for sponsored tweets that appear at the top of search results for certain keywords.

The second pillar is commercial accounts, which Twitter started to talk about last year. That service will allow a business to pay for a Twitter account in return for detailed analytics tools and the ability for several people to post to the same account. Commercial accounts are in beta testing with "a couple of hundred customers" and will be offered more widely in the future, though Costolo didn't say when.

It's a simple plan but one that has some potential pitfalls. Twitter will have to roll out Promoted Tweets in a way that doesn't put off users who have grown accustomed to an ad-free service, and in a way that is seen as fair and transparent to advertisers and the partners who build third-party applications like TweetDeck.

Twitter will also have to be careful how it handles the personal information it can glean about users' habits and interests from their Twitter feeds. Facebook and Google have already shown the type of backlash that companies can incur of they don't respect users' privacy.

Promoted Tweets show up today only in searches, Costolo said. Location-based information will likely follow, he said, allowing Starbucks to show a Promoted Tweet to users in a particular city, for example.

But Twitter is also sitting on a potential goldmine of personal information, since people's Twitter feeds reveal so much about their interests, taste in music and more. Costolo called it a "real-time social interest graph" -- a pool of valuable information about the topics its users are currently interested in.

"It's super-interesting and compelling for companies to be able to target that social-interest graph. It's our objective to prevent them from doing it in a way that's spammy or ... in some way negative for our users," he said. 'That's why we're rolling this out so slowly."

Journalist John Battelle, who interviewed Costolo on stage, pressed him further about how Twitter might use that information. Will advertisers be able to use the social-interest graph to target Promoted Tweets at specific groups of users?

"I don’t now if we're going to do it like that," Costolo said. "We're going to be very cautious and test a bunch of stuff in different ways before we target this beyond search. Maybe the only way it will work [apart from search] is geo," or based on a user's location, he said.

Promoted Tweets is in testing now with a handful of advertisers. Sometime before the end of the year -- Costolo didn't say exactly when -- it will be rolled out widely and developers will all have the option to display Promoted Tweets in their third-party applications. Today the ads are shown only at Twitter.com.

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