The question that has been on everyone’s mind since Twitter took off is how the site will ever make money. While users are only a fraction of those that Facebook and MySpace see, growth over the past year has been over 900%.
Andy Beal recently speculated that sidebar ads are probably first up in an attempt to earn revenue based on changes seen to Twitter’s homepage. Hopefully Twitter has something more up it’s sleeve than this if it want’s to have a viable revenue model. With the number of free Twitter applications that allow members to manage their twitter account without ever going back to Twitter.com, impressions become significantly decreased, and the advertiser’s click potential is down.
And what kind of companies would want to advertise on Twitter anyway? Implementing a keyword targeted ad option similar to Google’s content network advertising would never be targeted, as tweets are constantly updated. Matching ads to your followers tweets might not deliver advertising that you’re particularly interested in. Or big brands could advertise like they do on other big sites (CNN, Evite), but I’ve already stated my opinion on how effective display advertising can be.
So what is Twitter left to do? They were so successful releasing their API to programmers that they’ve moved their power users off their site. You could charge for API access, but that would just force developers to pass costs onto their end users, which I imagine people won’t be happy about. Everyone has their own idea how Twitter should make money, it will be interesting to see what they ultimately decide to do.