Making money on Twitter with Ad.ly

Financial analysts (and regular people too) have been wondering how to make money on Twitter ever since its launch a few years back. Well finally a profitable business model has risen from the social media quagmire. Let me introduce you to www.Ad.ly which has exploded onto the Twittersphere in the last few months.

This Beverly Hills technology start-up has ramped up in a big way since it started to focus on celebrities. The most famous one to sign up in recent months has been Charlie Sheen. The “Two and a half men” TV star went from a drug-induced stupor, to publicly cavorting with his goddesses, to getting fired from his top rated sitcom, to making several thousand dollars every time he clicks “enter” on his keyboard. That’s a “winning” business strategy.

Ad.ly’s financial model is simple and elegant. First step, a celebrity with at least one million followers signs up on their network. Then, a company seeking exposure is matched with the appropriate celebrity. Then, the celebrity tweets a custom-made advertisement on their Twitter account to their adoring fans. Fans, in turn, click on the specially designed URL in order to find out what their favourite celebrity is talking about. Finally, the fan buys the product the celebrity has just endorsed.

Sounds simple enough. But that last step is where the rubber hits the road. Does this type of promotion actually lead to increased revenues? Let’s take the model above and provide a simple example. Cristiano Ronaldo (the famous Real Madrid footballer) has about 2.7 million Twitter followers. Through Ad.ly, he gets approached to endorse Magic Water (I just made this up). Ronaldo then sends a tweet to all his followers stating that Magic Water was the reason he scored that spectacular bicycle kick against Toronto FC last night and that we should all drink Magic Water because it’s awesome, etc. etc. Ronaldo also provides a URL that he encourages us to click on for more information.

That’s when the cash register starts to ring. Ad.ly gets paid by Magic Water for every single click-through to their website. With 2.7 million followers, even if only one percent were to bite, that’s a lot of cha-ching in Ad.ly’s and Ronaldo’s pockets. In some cases, click-throughs are valued at one dollar each making this a nice twenty-seven thousand dollar pay day. I mean pay tweet.

But did anyone actually buy any water? After all, Magic Water needs to recover its advertising expenses at minimum. Well the answer may not be as clear cut, but the momentum of companies wanting to participate points to a resounding success so far. Since Ad.ly’s launch, they have made over 24,000 endorsement deals with a 1,000 celebrities including Kim Kardashian (7.3 million), 50 cent (4.5 million), Mariah Carey (4.3 million) and Paris Hilton (3.8 million).

I am now left with two main questions. First, how can I trust what 50 cent tells me in a tweet when I know that he is getting paid to lie? Wait a second, hasn’t Michael Jordan been doing that for years on TV with Hanes underwear? My second worry is a bit more personal. I only have 1,200 Twitter followers so far. How long will it take for me to reach a million? Well, there’s no better time to start than the present, please follow me on Twitter @NickBontis.