Twitter could be better for advertisers than Google.

I've read a ton of stuff over the last few weeks on Twitter and a lot of the articles seem to be in the category of "How can Twitter make money?" And there's been a lot of interesting ideas thrown about. I'm a huge fan of Twitter and I think they actually have multiple money making opportunities available to them, but here I thought I'd explore one in particular, Network Based Marketing.

Now, if you know me, you know I tend not to be a fan of online companies that use advertising (or being acquired) as their sole means of generating cash. But companies pay, and get paid, billions for advertising online. I really think there's an opportunity for Twitter here, so I thought I'd throw in my two-cents since I haven't read it anywhere else.

Let's take a quick look at advertising. From a high-level, there's a few distinct ways for a company to advertise its products/services. A company can:

1) blindly carpet-bomb a region with flyers and see who that brings in to the store/site
2) target distinct groups within a region, send them flyers, and let those customers targeted get the word out to others for them (demographics)
3) target social networks, send flyers to groups based on connections, let those customers targeted get the word out to others in the network for them

( and 4): collaborative filtering ; fits into this list somewhere. its a hybrid of 2 and 3 and can be seen with amazon's : "people who bought X also bought Y" mechanism. There's an opportunity here to, but probably requires a post of its own.)

Continuing, let's take phone companies as an example because they figured out #3 a long time ago, I'm sure you've heard of the "Friends and Family" plans? And since there can be a lot of people in a network, I'll use a fictional character "Ashton" to assist with the following examples.

If you carpet-bomb a region with adverts, Ashton may pick up the advert, say "Oh, that looks interesting." And then forget over time to even go to the store/site to investigate that product he thought he was interested in when he first read/saw/heard the ad.

You may have better luck if Ashton fits within a certain demographic, as then you can tailor the language of an advert to Ashton, but you're likely to still end up with the same results. Worse yet, Ashton might not be recognized by the attributes used to define the demographic. As a potential customer, Ashton may just fall through the cracks, overlooked and missed by the marketing team altogether.

But if Ashton's friend or family member is sent a flyer and that member then either buys the product, investigates it, or talks about it, Ashton will wind up having a strong connection to the product. Some real feeling will be associated with the product/service based on the strength of the connection between Ashton and those other members of his friends and family who share their experiences of the product with him. As more members of Ashton's group adopt products/services, they provide steady reminders to Ashton of their interactions with the product/service and there's a repeating message, delivered from someone he's close with, to get to the store/site and check-out/buy those products.

So, I'm trying to keep this post as succinct as possible. For real detail, go check out Shawndra Hill's, Foster Provost's, and Chris Volinksy's paper on Network Based Marketing. They provide direct, statistical support for the hypothesis that network linkage can directly affect product/service adoption. I also have friends who were able to recreate the experiment at Yahoo! and were able to increase sales of a specific service there by targeting "friends and family". In a nutshell: consumers linked to a prior customer adopt a product/service at a rate 3–5 times greater than groups targeted using the best practices of any firm's marketing team. So I'm not making any of this stuff up, its actually based on science and research.

Phone companies can determine a person's network just by monitoring who you call. They can look at the people you dial most ( and who dials you ) and can pretty easily figure out who's in your actual social network, not an online site, but the group of people you are active in and participate with daily. They've found that instead of canvassing the nation with flyers selling the latest phones and services, they can target "friends and family" (the top n% of people you dial/are-dialed-by most) and have much greater success (Sales!) with their advertisements, by leveraging people's social networks. When advertisers target the right people, the advertisement information diffuses through the network, and other people end up doing marketing for the company, whether they intend to or not.

Now, Google makes a lot of money through advertising. As an advertiser you put your billboards on the streets most traveled and everyone online uses Google for search. But with Google, you have keywords and intent to help target ads. When a person searches, there is an explicit intent to know more about what they're searching for. Google advertising is similar to traditional advertising in a magazine. If you open a magazine about fishing, you don't mind seeing ads for fishing equipment. If you open a fashion mag, you expect to see ads for clothes, cologne, etc. Online, the magazine's always changing as the pages are composed from various search results. Google targets ads based on a user's intent (keyword search terms) and the words in the page being viewed. (I'm sure they also bring demographic info into the mix somewhere.) So Google gets advertisers closer to their market, and if all else fails ...

Google uses a shotgun approach that's slightly more intelligent as the ads blasted at you are based on keywords in your search terms, search results, or emails. This doesn't always work out though. For this post I searched on some sample terms for examples. I searched on "movie times" and an ad/link came up for "Gay Spirituality" in addition to moviefone.com, etc. , so go figure how the algorithm works here. Google does a great job for the most part, but could do better if they didn't have to work within certain constraints.

Google/Yahoo could serve up much better adverts if they could target a person's social network. The tools they have to unlock those networks though are email and chat. Unfortunately for them, most users (us) tend to think of these as private tools. Whenever any company attempts to touch a person's contacts or inbox, issues of Privacy arise and people get seriously riled up about maintaining their anonymity/privacy. All these companies analyze our networks internally, but letting that fact out to the public scares them as they know the response will be negative. They've also been seriously scarred by the AOL fiasco. So they do the best they can internally with all the data they've stored from our interactions, but their hands are tied: It's their kobayashi maru scenario.

Enter Twitter: It's all public. Tweets are all blogs. Now, the naive keep looking at follow/followcount as some indicator of a social network or a person's relevance within a network, but just how a phone company can determine a person's network by phone-number and who's calling who, we can determine a person's network on Twitter by user-id and the use of the @ sign (who's replying to who, how often, etc.). Where ever you have replies back and forth (use of @) , you can increase the relevance of the connection between individuals. Do this a few times over a few connections, and you have a closer approximation to a person's real network, not the false one found in follow/following counts.

With Twitter, the privacy argument is thrown out the window. People who post on Twitter understand its a public forum. So just off simple queries based on @userid, you now have the ability to start serving ads to "friends and family" on Twitter. But wait, it gets even better...

In addition to user-ids and the network, you also have people's conversations. People form networks around similar interests, and they naturally tend to use similar language (either determined by locale, interest, topic, lingo, etc.) within certain groups, and discuss the same products, services, events, etc.. In addition, Tweeters use the # sign to categorize discussions. So there's a tremendous amount of classification info available to enrich people's social networks with. All that classification info can be used to build advertisements that target specific groups, and voila, you now have friends and family plans for any product via Twitter.

So there's definitely an opportunity here for Twitter and a Google/Microsoft/Yahoo search division to partner. Even off of simple keywords in tweets you'd probably get better targeted ads as you could tailor keyword dictionaries based on the network and the domain its in.

Personally, I think that should be a short-term goal. Twitter could target ads better using a combination of a person's network, the context of keywords within tweets, and behavior. Mobile fits in here too of course.

But right now, with some simple social network analysis and some simple keyword usage of their own, Twitter could deliver their own adverts and they'd be way more effective for advertisers than what they're paying for with the traditional approaches used by search companies today. Leveraging what Twitter has for advertising could be a way to bring in some revenue in the short-term, until other opportunities manifest themselves in Twitter's other plans and innovations. Even if they come out with a different, successful business plan tomorrow, it seems there's a huge opportunity for revenue here that shouldn't be overlooked. And as they'll be able to distribute ads with an improved targeting mechanism that will be more effective for advertisers, Twitter shouldn't have to distribute as many ads to still make some serious coin.

I get very excited about the opportunities available to Twitter. I have an interest in using both NLP and SNA to help people find what they're looking for online and in the enterprise. Twitter's dataset is perfect for this! The plan is to post here soon with some demonstrations that leverage the Twitter API. But until then, you all really need to check out what @petewarden has created with Mailana. He's already started to deliver tweeter's social networks based on who's actually communicating with each other. Very cool.