April 12, 2010 5:54 am

Race on to unlock Twitter’s potential

A race to cash in on the global Twitter phenomenon is set to be triggered on Monday with the launch of a service that attempts to replicate the highly successful search engine advertising formula that has made Google rich.

Bill Gross, the Los Angeles-based internet entrepreneur who invented search advertising in the late 1990s, said that Twitter’s audience was already potentially worth “billions of dollars” a year. The lack of effective ways to tap this meant an advertising service like the one to be launched on Monday from his new company, TweetUp, could become an entrenched part of the Twitter ecosystem within three months, he predicted.

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The move comes as Twitter edges towards launching its own system for making money from tweets. Four years after the creation of the hugely successful micro-messaging service, the lack of an effective way to profit from tweeting has started to bite among the “Twittersphere” of web developers who have been drawn to create applications around its service.

“The state of the ecosystem is that no one is making much money,” said Loic Le Meur, founder of the Twitter application Seesmic. Services like Seesmic account for an estimated 80 per cent of tweeting activity, with the rest taking place on Twitter.com.

“If the apps don’t start monetising in the next two or three quarters, there is a serious risk that many will go out of business in a year or two,” Mr Le Meur added. “That is a real risk to Twitter, since so much of their traffic comes the apps.”

Twitter has made it a high priority this year to come up with a system of its own for making money from tweeting. However, it has ruled out simply inserting adverts into its users’ tweet “streams”.

“Just because Twitter watchers are so seemingly in a rush to monetise tweets and have seemingly even made sport of it, it doesn’t mean that Twitter feels the same way,” a spokesman for the company said. He added that Twitter would “pay very close attention to implementing the strategy in a way that puts the interests of users first”.

Mr Gross’s new company, TweetUp, is set to launch an auction-based advertising system on Monday that is closely modelled on the one that produces most of Google’s profits. Well-known investors behind the service include Steve Case, founder of AOL.

Mr Gross’s internet incubator, Idealab, came up with idea for search advertising in the 1990s when it launched GoTo.

Advertisers on TweetUp will be able to bid to have their own tweets displayed when users search for particular keywords in the company’s Twitter search engine. Mr Gross said he believed the service would appeal to individual users of Twitter who saw it as a way to build a large personal following.

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