Twitter Ad Revenue Plan Revealed; Not Impressive So Far ...

Twitter has revealed more about its plans to generate revenue based on advertising. An ad plan for Twitter has been revealed, but it apparently generates no revenue for Twitter itself. Client Sayso Mobile purchased a bunch of Twitter user profile homepages and sent an automated message to users following those people. But the company placing the buy — and thus taking the fee — isn’t Twitter, it’s Twittad.com. (Twitter is desperately in need of a busines plan, as BNET readers already know.)

The media buy cost Sayso $105 for eight profiles. Here are the stats from Twittad’s case study:

• One tweet sent at beginning of ad serve from each profile (“Hey! My background is sponsored by Sayso, please check out www.saysomobile.com Invite Code TWITTAD.”)
• Total followers reached: 10,409
• Average ad duration: 11 days
• Total Cost: $105
• Average cost per follower: .01 cents
• Highest profile purchase: $45 for 7 days for a Twitter user with 4,412 followers.
• Traffic: “more than doubled”
• Signups: 21 new subscribers

As Svetlana Gladkova at Profy notes, that’s a CPM (cost-per-thousand viewers) of $10. She doesn’t think it’s very competitive:

For anyone lacking knowledge in the online advertising business I have to say that at the rate of $10 CPM the company could easily buy impressions from top-quality technology blogs that could display their ads every time a visitor arrives to any of the pages — which definitely happens much more frequently than people watch Twitter profiles of the most proficient tech bloggers. What’s more, $10 CPM is considered to be a rather high rate so they could easily buy cheaper if they chose that medium.

Gladkova also points out that the SaySo business model essentially bribes its customers into signing up — most businesses aren’t going to do that.

A more important point would be to ask, what good is this to major advertisers? Yes, it’s cheap. But if you’re only reaching 10,000 people and making 21 new sales, that is just not going to be interesting to Coke, Pepsi or Procter & Gamble.

To take the opposite view, Twitter CEO Evan Williams (pictured) thinks Twitter’s model is “scalable,” like Google’s. Google’s massive ad revenue is based largely on millions of small businesses making very small ad and key-word buys. Could the same happen for Twitter?

My guess is no. Google’s ad revenue basis succeeds because it’s a search engine; it’s where you go to find things you want to buy. No wonder advertising space on there is valuable. Twitter is the opposite. No one looks on Twitter for DVDs, books or music.

So in the medium term, advertising on Twitter is more likely to be the brand-image-exposure type that is relatively unattached to sales. Unfortunately for Twitter, if it decides to get into this, that is exactly the type of web advertising that is weakest right now, as BNET readers learned here and here and here.

CEO Williams is clearly hoping for a lot:

“We’re looking at Q1 for revenues.” This is a change from the original, pre-economic meltdown plan. “The original plan was to focus on revenues in 2010. That’s no longer the case, since I don’t want to raise money in 2009.”

The revenue plans aren’t just ads or sponsorships. “We want revenues to be product-based.

“Revenue plans” have become more important to Twitter since merger talks with Facebook fell apart:

Serious talks between the Facebook social network and the Twitter microblogging service started soon after Mr. Williams took over as chief executive on Oct. 16. Twitter reportedly rejected Facebook’s $500 million, mostly stock offer several weeks ago.

“We explored it, as we should. We took it seriously,” Mr. Williams said. “It definitely made sense — the strategy we talked about with them — but it wasn’t the right time.” Ultimately, he said, Twitter decided that it had too much left to do, beginning with figuring out how to make money.

Which puts a lot of eggs in this small-scale, $10 CPM basket …