I often get asked how Twitter makes money. Their revenue model is largely based on advertising, and ads are actually called "promoted tweets." I thought this recent article from Ad Age did a great job summing it up. You can also click the link to see some of the top promoted tweets from the past year, created by companies including Old Spice, VW, Ford and Google.
Read more at adage.com
From the start, Twitter has charged for promoted tweets on what it calls "engagement" or user action -- a retweet, response, click on a link or when a user marks a post as a "favorite." Marketers don't pay when the tweets go nowhere. Twitter also only charges for the first retweet of the original; subsequent retweets are "earned" and free.
As sales chief Adam Bain says, "Marketers are rewarded if they are good, not just if they're loud."
While ad spending on Twitter is expected to grow to $150 million in 2011 from $45 million in 2010, according to eMarketer, brands are still working out how to use the platform effectively.