The perennial debate surrounding Twitter’s revenue model continues to live on. The micro-blogging service has succeeded in building a strong, loyal following, but failed to capitalize on it. Such a scenario, which lacks a revenue model, isn’t sustainable over the long-term, especially when investors begin to question the company’s intentions. If an acquisition isn’t shaping up, monetization will be necessary to keep Twitter afloat. Having said that, leveraging context may prove to be a great way to drive revenues while maintaining the integrity of the platform.

This is a guest post by Aidan Henry, a social media expert and blogger. He can be found on the web at MappingTheWeb.

Leveraging Context

Essentially, this would entail Twitter parsing over the Tweets of a given user, as well as the Tweets of the users he/she is following. Common keywords, themes, and phrases are then pulled from this data and associated with that user. As a result, highly-targeted ads can be displayed based on the user’s network of content (”web design”, for example). These simple text ads would look very similar to regular Tweets, but would be clearly marked as “Sponsored Content”. Facebook employs a comparable strategy through their News Feed, although ads are based on demographic information as opposed to context. These Twitter ads would appear every 20 or so Tweets depending on the frequency chosen by the company.

Integrating ads into the content stream is a delicate process. Caution must be exercised and full notification must be provided. One wrong step may prove costly. Nonetheless, if ad integration can be accomplished in a seamless, unobtrusive manner, it can be extremely effective.

Ad System

The ads would be generated via a proprietary auction system developed by Twitter. Advertisers would bid on desired keywords and phrases, somewhat akin to Google AdWords. These specified terms, or bundles of terms, would ultimately be assigned to the highest bidder each month (as an example). The ads would run until the advertiser budget runs dry or the month ends. If the former is the case, excess inventory would be allocated to the second highest bidder. If no bidders are left, superfluous ad space can either be filled with Google ads, ads from partner networks, or house ads.

Obviously, most of the ads would be tech-centric — after all, Twitter has yet to break into the mainstream. Its user base is filled with bleeding-edge tech enthusiasts. Armed with this knowledge, advertisers can directly target tech innovators, influencers, and early adopters while Twitter is able to command premium ad dollars.

Tiered Model

This strategy paves the way for a two-tiered “freemium” model. Any users that choose not to view the ads could be charged a small, yearly fee that would create an additional revenue stream. Ad-free account could be combined with premium features and added functionality beyond the basic offering to give users more value.

The combination of highly-targeted, contextual ads and a premium subscription should suit the needs of most users. Those who don’t want to pay for the service don’t have to. Those who don’t want to view the ads don’t have to either. At the end of the day, creating a flexible revenue model that doesn’t cause a user backlash is the ultimate goal. If personalized, contextual ads appeal to the user, I have no doubt that users will not only accept this new model, but embrace it.

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