$how me the money!

So its been 2 1/2 years, and still no business model from Twitter (even with a co-founder by the name BIZ Stone...c'mon!). Obviously this method isn't anything new for the Web 2.0 pioneers in social media...Facebook has tested the limits of this practice, and still hasn't released a viable model. This youthful style of ready-fire-aim has been questioned by the critics and traditional business analysts time and again, the response always being (in either an aggravated or snobbish tone), "we'll figure it out!" And its hard to argue with, seeing as how Larry and Sergey did it 9 years ago with Google. But search is certainly different than social media, and the latter has only been mildly validated by MySpace, who actually entered the space with the intention of becoming a PROFITABLE enterprise.

Twitter has maintained that it does in fact have dollar-earning plans for its micro-blogging community, and they "plan" to announce those next quarter (they've already hired their very first head of Product Development). But they should really stop outright dodging the question, especially co-founder Evan Williams. Every time he's asked, he makes it seem like they're a bunch of kids who got too much money and scaled to a point where their out of their league. For the record, I still very much believe in Twitter's viability; they have a very loyal and outspoken user base that is growing very healthily, their distribution has continued to open up all across the social stratosphere (they've just partnered with Facebook Connect, MySpace ID and Google Friend Connect), and their application is being used in hundreds of different contexts to increasingly valuable niches. One niche in particular is the socially apt finance world. While the industry itself may be the Grinch that stole Christmas (and its bonuses), StockTwit, a recent startup, just raised $800k in a Series A this month (via CrunchBase). Its web applications like these that spread Twitter's utility around in healthy doses. The virtual infrastructure is certainly in place, it is simply a matter of solving the monetization problem. And I really hope its not ad-based, because the most recent attempts companies have executed on Twitter in hopes of connecting on a more personal level with their customers have been all but disgusting and inauthentic.

look daddy, straight a's!

What the son isn't pointing out is that the classes are workshop, home ec, and Enligh as a Second Language. And herein lies the problem currently facing the advertising and marketing world. With the country now officially in a recession, advertising budgets are the first to get cut, specifically experimental and unquantifiable media. This means companies are looking to areas such as direct response ads (which have grown 27% YTD while most other ad products have decelerated), which have easily derived ROI's. This is basically an attempt for the marketing department of a company to prove itself to the board so the VP's don't get chopped as just another gangreined limb.

Unfortunately, we are in a time when companies need to reach their customers in the most cost-effective and relevant way possible, and more often then not that does not include media with easily derived ROI's. We are beginning to see this take effect in the digital ads space, specifically in display ad sales and the declining rate of CPM's. Firms are simply realizing these impression metrics simply aren't as valuable as everyone has been thinking. What needs to happen is the emergence of an entirely new online advertising model (or a paradigm shift to something like mobile), but unfortunately for the next however many months, companies simply won't have the cash to experiment and execute. Ad networks and advertisers alike should really begin (or should have already begun) rethinking their traditional models and find a way to monetize on alternative forms of digital media or, God forbid, without the reliance on advertising altogether. Either way, the model's broken and no one has the tools or manpower to fix it. We'll see a significant drop in the online advertising market over the following year as a result, but hopefully the old sayance "necessity breeds invention" will hold true and we'll see a beaute emerge.

Until til, keep your heads low and keep posting those A's.

Neilson online advertising spending breakdown (via AlleyInsider)