On February 5th, Twitter released their quarterly report—their first as a public company—to an eager crowd of investors, techies, and analysts. Ever since the company started, people have asked how the hell they planned to make money. In large part, Twitter wants to monetize itself by becoming the world's chat room.
The question is how much potential that global chat room has to be profitable. A series of recent partnerships by Twitter give us a pretty good idea of what's eventually planned for finance, retail, and marketing. Two ways Twitter can potentially create revenue: by being an online advertising platform, and by offering its data stream as a hybrid mega-focus group/intelligence source.
As an intelligence source, Twitter has recently signed agreements that let journalists mine Twitter for story leads in real time and let A&R reps mine Twitter to determine which unknown bands are becoming popular (on top of similar partnerships in the financial sector aimed primarily at hedge funds).
At the same time, a newish soft feature Twitter is testing notifies users when their friends tweet about television shows. The experimental Tailored Audience program lets advertisers aim promoted tweets at users who have viewed a page about that topic elsewhere on the web. Not to mention Twitter's existing partnerships with NASCAR, the NFL, and others.
But then there's Amplify. Amplify is Twitter's name for a multi-screen advertising product they're pitching to content producers like A&E, Clear Channel, and the NBA. Fast Company's own Ellen McGirt and Nicole LaPorte describe it as a product "which lets content creators send short video clips (along with an ad) not only to people currently live-tweeting a show but also to anyone it thinks might want to tune in". The Amplify product is an ingenious way for Twitter to turn their mobile app and homepage into the platform on which fans comment on sports matches, award shows, and television programs in real time. And, of course, once fans are second screening through Twitter's home page, Twitter's partners can step in to offer targeted (and hopefully lucrative) advertising.
The demonstration of Twitter Amplify below, created by BTIG Research, gives a pretty good overview of how the product works:
Alongside Amplify, Twitter has also been promoting their television advertising dashboard for advertisers, which allows them to individually target TV-watching Twitter users with ads. Both projects tap into an entertainment industry goal which has been coming to fruition at exactly the same time that Twitter itself jumped from geek to mainstream: How to microtarget individuals with television commercials.
ABC, CBS, NBC, Comcast, Time Warner Cable, DirecTV, Nielsen, and a slew of others are all feverishly working on technology that lets them individually target households with advertising. Although the technology is still in its infancy, the goal is to replace traditional television ad buying (where timeslots on broadcast stations or on cable television programs target the entire viewing audience) with a system that highly resembles Internet advertising. In pursuit of this new goal for television advertising, cable companies, such as Comcast and Time Warner Cable, serve as middlemen, offering marketplaces where advertisers bid to reach one household or another household. If your household makes $20,000 more than the neighbor next door or you recently searched for a new car on Google, your TV ads will ideally be completely different from that of your neighbor.
The TV industry's eagerness to target households and individuals in this way gives Twitter an opportunity to help brands extend those campaigns on its own platform, as the video below explains:
Then there's "See It." Back in October, the company launched a low-profile test project with Comcast to allow users to change the channel with a tweet. Although the "See It" feature is gimmicky, the fact that Twitter and Comcast successfully collaborated suggest there may be other joint efforts going on. It also points to where Twitter likely wants their infrastructure to go. If users are changing television channels with smartphones instead of remote controls, that can potentially generate a far greater and richer data stream for media companies to exploit. For example, smartphones can tell how long a user lingers on a channel in a channel listings menu before moving on.
Stephen White is the president of Gracenote, an entertainment metadata firm that is one of Twitter's many partners in the sphere. As he puts it, "the signal Twitter curates is valuable...It's amazing to see the sheer traffic of music-related posts and discussions on Twitter." When I asked about the relationship between making money from advertising and making money from offering their platform as a massive global focus group, he added that "Twitter is trying out a few things in both advertising and (monetizing) market research in order to figure out what they want to do and provide value in both areas. The data they control is very valuable from an analytics perspective, and can lead to lots of advertising and decisioning value."
In other words, in addition to being a platform that draws in more viewers for and chatter around TV shows, Twitter has the opportunity as both an advertising platform and a market research service for TV commercial campaigns in this new, multiscreen world. Microtargeted ads on TV likely won't be a full-fledged reality until 2020 at the very least—but Twitter wants to be the one making money from it when it does happen.