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Friday, September 25, 2009

To Ev and Biz: Click Arbitrage Tips for Twitter

Hi Twitter,

In light of your impending $1 billion valuation, juxtaposed with Bill Tancer's observations that Twittermania might just be leveling off, we thought we'd propose an easy, short term way that you can cheer up your investors and slow the burn rate on the large sum of cash they're about to fork over. Slower losses, less buyer's remorse for the investors... while you get the business model really figured out.

The beauty of it is, our method increases your traffic and member base, rather than demotivating your existing user base.

Since everyone from Google to Seth Godin to Iran has been donning hats ranging from grayish to dark black this week (Sidewiki, Brandjacking, and nukes, respectively), we figured our plan might not even get labeled evil. Ethics, schmethics.

The idea is simple. Buy Google AdWords keywords on every topic under the sun and run them globally, avoiding the US where the Quality Score bar may be a bit higher. Bid low. Use a lot of automation and dynamic keyword insertion.

Let's say someone is reading an article about the fashions of the G20 leaders and learns that one of them was wearing a Hermes tie. So for some strange reason, they go to Google and search for "G20 Hermes Tie." You are using an automated tool to build ad groups around broad matches of major breaking news items, like G20. So of course, you've got this one covered!

Example ad:

G20 Hermes Tie
Tweet or read tweets about
G20 Hermes Tie. 140 chars. only!
http://twitter.com

Now, you set up a custom landing page loaded with relevant text ads (from another CPC ad network, say, Yahoo), and hope the resulting ROI on the arbitrage is at least breakeven. As a secondary goal, you hope more people sign up for Twitter accounts. Insofar as this turns a profit, you can even cut into the monthly cash burn.

Target average CPC on text ads in USD: 19 cents
Target average revenue per click on same ads: 25 cents

Profit on ten million clicks per quarter: $600,000
Profit, minus management fees: $450,000

Annual revenues from ads: $10.0 mm
Annual profit: $1.8 mm (gotta start somewhere)

Annual traffic increase: 40mm visits

Presto, now you're monetizing and adding visitors without even placing ads on existing pages. Just like eBay does!

If you run into Quality Score problems - no problem. There is still a massive content targeting inventory you can use. That's a legitimate way of building an audience. And oh, so, so, so much cheaper than Yahoo's $100 million planned ad campaigns.

Your traffic and user counts will resume growth, and Mr. Tancer will have to admit as much.

Good luck with it! We know you don't need the money, but we sure are curious as to how you will eventually monetize the Twitter juggernaut. You could charge corporations for some way of putting a shiny face on their brand reputation, but something tells us this could blow up in your face.

Sincerely,

The Team

P.S. - You're welcome.

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Posted by Andrew Goodman




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