It was recently announced that Twitter, everyone’s favorite (theoretically) billion-dollar business, finally has an actual business model! Yesterday, they launched their advertising platform, known as “Promoted Tweets”. This platform allows for advertisers to enter the top of the twitter stream above all of the other tweets in a given stream. For the time-being, these paid tweets will appear one at a time and be restricted to Search results within the Twitter site. The plan, however, is to expand to Twitter’s Public Timeline, as well the streams of anyone following a given advertiser. Assuming that all goes as planned, this should all be rolled out by the end of 2010.

They’re starting out with some big budget names, including Virgin America and Starbucks. They’ll get the ball rolling relatively simply by having advertisers bid on keywords on a CPM basis, but intend to refine things later in the year using what they call a ‘resonance score’. This metric will allow them to evaluate the impact of each sponsored tweet based on views, retweets, and favorites. Tweets that garner little or no response will simply vanish (as do many late-night tweets, currently) with no charge to the advertiser.

This self optimization bodes well for small, niche businesses as well as for those with larger budgets. It’s not necessarily CPA marketing, but it is performance-based, allowing everyone, large or small to enter this new arena with a certain air of confidence. That said, I’ll be interested to see what this looks like in a year. Will Twitter be able to live up to their billion-dollar reputation without tuning the public timeline into an AOL Chatroom –like environment with “Cheap C1@L1S” and “Hawt Gurrlz in ur area” scrolling by at light speed? Hopefully, they’ll be able to maintain a balance between sky-high prices and an environment that becomes more advertisement than user-generated content.

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