Plucking the goose

Twitter: Twitter is taking a small step to becoming a real business. The microblogging site for the attention deficit disordered is carefully rolling out advertising. Ads will be limited to searches and those that don't generate favourable response pulled. It's a sensible first step in Twitter's need to generate revenue without annoying users. But, more are needed.

While Twitter's users send about 50 million messages a day, and the figure is growing quickly, it has been unclear how the company will support itself. Yes, the company raised a reported $100 million in September. And, agreements with Microsoft and Google later in the year added perhaps a quarter as much. But, the firm needs regular and larger injections of cash to sustain growth and fight off rivals like Facebook.

Yet, as its social networking competitor's experience shows, making ads too intrusive may put off users. The start-up doesn't need to further the perception that Twitter feeds are narcissistic and corporate exercises in self promotion. Its initial effort does a good job of plucking the goose while generating minimal hissing.

First, the ads will only show up for less than 10 percent of users. Over time, this figure will presumably rise, but it gives time for customers to get used to the idea of sponsored tweets. Second, ads that users don't forward or mark as favourites will be deleted. This ensures customers will only find promotions deemed to be useful or at least minimally entertaining. And, advertisers will know their ad dollars are being spent wisely.

That said, Twitter will eventually have to expand advertising beyond this experimental realm. Many of the service's beneficiaries simply avoid the company's site and use third-party software to sort and add context to tweets. These users are the company's next step. While the company has taken a good first step to make ads useful, the trade-offs between intrusive advertising and the need for revenue generation will probably become more acute over time. If Twitter wants to reach its goal of a billion users, it will need a substantial war chest. For that, the firm will need to generate dollars as effortlessly as starlets and pop stars produce tweets.