The massive advertising shift that Twitter is trying to capitalize on with its API

Much has been written about the disruption taking place in the media industry as a result of the web and the atomization of content, but less has been said about how the advertising business — on which most of the media industry continues to rely — has been going through its own disruption. One of the seismic shifts that has been upending business models is the one that Twitter is trying to capitalize on with its API: namely, the increasing move towards “programmatic” or automated ad buying, as opposed to the traditional human-driven ad game.

This is about more than just some tinkering with the machinery that underlies the content we consume. As Felix Salmon notes in a post at Reuters, virtually every media entity — from behemoths like the New York Times to the smallest independent online player — is being forced to reinvent how they generate revenue because digital advertising is not paying the bills (Note: We will be discussing alternative monetization methods on a number of panels at our paidContent Live media conference on April 17 in New York).

Another battle between algorithms and humans

Like most of the other changes in the media industry, this shift didn’t just just happen overnight. Instead, it’s a wave or a series of waves that have been building steadily over the past several years. As with so many other elements of the disruption in digital content, Google arguably triggered this particular tsunami with the introduction of its search-keyword based auction process — an idea it borrowed from Bill Gross and Overture — but the ripple effects of that decision have continued to grow and expand in force.

In a nutshell, advertising has become yet another battleground for the fight between humans and algorithms: the human beings at ad-buying firms and ad networks who used to buy and sell banners and other traditional forms of advertising, and the algorithms that drive “programmatic” buying based on keywords, topics that are trending in social media and other factors.

As we described earlier, this is something the New York Times has been experimenting with via an in-house tool that tracks which stories are seeing the most activity on Twitter, and then offers advertisers the ability to insert their ads into those stories. It’s no longer about where that content appears in a physical product like a newspaper, or even what the story is actually about. Instead, it’s more about who is engaging with it, and where, and how.

Part of this shift is the transition from what some marketers call “outbound” marketing — which includes direct mail, banner ads and other methods that try to reach out and grab the attention of potential customers — to “inbound” marketing, which relies on search-engine optimization and other content-based strategies that make it easier for users to find a brand or advertiser without being bombarded by ads (Demand Media and other “content farms” have tried to apply this approach to content, with mixed results).

Hubspot, which specializes in inbound marketing, says it is more or less taking over the online world, and the consequences for traditional media companies are dire:

Automated buying vs. human-created content

So what does all this have to do with the Twitter advertising API? In a nutshell, the API is a way for companies to automate more of their ad spending. At the moment, the list of official partners isn’t that long, but it will presumably grow — and the API combined with Twitter’s self-serve ad platform will theoretically allow advertisers to promote tweets based on what is trending and where the activity is. Twitter is also likely providing a host of information around users and their interests.

This is essentially the same game Facebook is playing, and while Google doesn’t have an open API for Google+ yet, it is likely thinking along the same lines. For social networks, in which the content generated by users is almost indistinguishable from the advertising — and in the case of Facebook, actually becomes part of that advertising, through features like sponsored stories — offering tools that let advertisers automate their spending based on hard data is potentially far more lucrative than another generic banner ad.

The problem for many media companies is that this is a game they are ill-equipped to play: for the most part, they have little or no data about their users that can compete with the granularity that Facebook or Twitter can offer, and they have no APIs or other automated, self-serve features to offer even if they did have that kind of data. On top of that, brands are setting up newsrooms and becoming content publishers in their own right, and further disintermediating the media.

This is part of the reason why so many players like The Atlantic and even Gawker Media have been focusing on alternative methods such as sponsored content or “native” advertising or affiliate links. But as Salmon notes in his post, these kinds of approaches are often labor-intensive (if you want them to be effective), and therefore high cost. In some ways, the market seems to be bifurcating: on one side is a growing business driven by algorithms, and on the other is a human-driven business based on customized content. Is there room for both?

Post and thumbnail images courtesy of Shutterstock / Everett Collection and Borrell Associates