If Twitter won’t do ads, then third-party devs will

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How will Twitter make money? It’s the $500-million question (the amount, mostly in stock options, that Facebook reportedly offered to buy Twitter) that has plagued the company since its rise to prominence.

Potential investors and technology analysts are notoriously cynical of Web start-ups that haven’t yet established a business model. YouTube and Facebook were pelted with those same criticisms in the past, and now, the skeptics are demanding the same from Twitter -- shake your money maker.

Twitter co-founder Biz Stone finally has an answer. By charging for corporate accounts, Stone says, Twitter will earn revenue from such companies as JetBlue, Comcast and Dell, which already use the social networking tool to build brand awareness and grassroots advertising. In exchange, Twitter will work with these companies to build corporate-exclusive features.

Stone described one such feature -- an identity verification tool that would allow anyone to discern easily whether a particular account is, indeed, owned by the person who the user claims to be.

‘Like, users who want to know: is that the real Shaquille O’Neal or not?’ Stone said. ‘Maybe we could help users by saying, Yup, definitely the real Shaquille O’Neal. That’s a real account. We checked with them.’

This could have come in handy last month when technology bloggers wondered aloud whether @theRealAlGore was actually, well, the real Al Gore. (It wasn’t. But @algore is.)

Stone wouldn’t go into detail about other features, but says the company has plenty of ideas kicking around. However, he was clear about one thing: Advertising is not the route they’ll take. At least, not any time soon.

But just because Twitter won’t place ads on its pages doesn’t mean others aren’t trying. Twittad allows users to ...

... list a price and time frame for advertisers to place a static graphic ad, embedded into the backgrounds of their Twitter pages (the top image is one example).

The third-party service, launched in August, has attracted more than 1,600 sign-ups and 170 advertisers, according to James Eliason, founder and chief executive of Twittad, a Des Moines, Iowa, company.

Magpie is an alternative ad network that takes a very different approach. Instead of a background image, Magpie inserts text and link ads directly as Twitter messages (called ‘tweets’) in a user’s profile. This method has raised some concerns within the Twitter community.

‘It’s a horror show,’ Stowe Boyd, a blogger on social media with a well-established Twitter account, said in an e-mail. ‘The worst.’

So, what’s all the hubbub?

Some say tweet ads detract from legitimate conversation. Despite the controversy, Magpie has managed to attract 2,500 users showing ads and 400 advertisers in the six weeks since it launched.

Tweet ads may be more effective than images because most users don’t access Twitter through the website, said Boris Ruf, founder of the German-based Magpie. Many users -- about 20 times more, according to Stone -- instead opt to browse Twitter feeds on cellphones or desktop apps, media that Twittad graphics can’t reach.

Even though Twitter won’t be jumping in with its own advertising program any time soon, Stone says he’s ‘taking everything in.’ And, for the record, he prefers the Magpie approach.

‘I think any kinds of projects that focus more on the Twitter updates are more compelling,’ Stone said.

But the real question on the minds of Twitter users and the company itself is whether the service should have ads in the first place.

‘It’s about the same discussion we had a couple of years ago with blogs,’ Ruf said. ‘In the end, if you are a Twitterer who really provides good content ... we say it’s fair enough to also make some money.’

Oh, and by the way, those ‘Facebook to buy Twitter’ rumors were real after all.

‘It’s just not the right timing for us,’ Stone said. ‘We’re big fans of Mark [Zuckerberg, CEO] and Facebook, and I think the feeling is mutual. It’s more of a timing thing.’

The ‘timing thing,’ it seems, is that they actually have a business model now.

-- Mark Milian