There are two Twitters. One is for special occasions only, while I am obsessed with the other. The ultimate value of the Twitter stock (TWTR?) is fully dependent on which of these two Twitters is on offer.

Twitter #1: What’s Happening?

The first version of Twitter isn’t hard to find:

Welcome to Twitter.

Find out what’s happening, right now, with the people and organizations you care about.

This is the Twitter that is presented at Twitter.com, and in their mobile apps. This Twitter loads at the top, giving you the most recent information first; after all, isn’t that the point?

This, of course, is the Twitter I use for special occasions only. I actually use a different app for this Twitter, so that I can scroll to the top of my timeline without losing my spot in the Twitter app I prefer. The problem for Twitter is that special occasions are rather rare, and, well, special, making it more difficult to sell advertising against.

While I think this Twitter is valuable in certain cases, I don’t find this Twitter very compelling as a business, and would not invest in it.

Twitter #2: What Matters?

This is the Twitter that I use every day, all day. It’s my single most indispensable service; I would give up just about all of my favorite things, including my iPhone, before I gave up Twitter. For me, Twitter is the single most efficient way of learning what I am most interested in, and care the most about. The signal-to-noise ratio is fantastic, and the content perfectly tailored to my interests.

Moreover, this version of Twitter is by far the best placed to make me respond to advertising. I’ve clicked on more than one sponsored tweet, and would likely find advertising placed through MoPub compelling as well. After all, Twitter knows exactly what I’m interested in, and that is valuable information indeed.

How the Internet Has Changed Advertising

Advertising is hardly new; even the ancient Egyptians used papyrus to make sales posters. 1 However, over the last ten years it has undergone a profound shift.

Previously, advertising channels like newspapers or television channels were the only means to a captive audience. For example, if you wanted to reach those living in Chicago, the Chicago Tribune or Sun Times were your primary options. This proved highly lucrative for those in the middle; their job was to create compelling content to ensure customers bought their product, which was in turn laden with advertising, from whence they made most of their money.

The Internet has changed this in a few fundamental ways:

• On the Internet, consumers are no longer captive. I have an effectively infinite array of choices for news, entertainment, etc., meaning the content that attracts me must truly stand out. Moreover, this massively inflates the amount of advertising inventory, destroying its worth.
• There is no longer a secondary revenue stream from consumers; except for a few high-profile exceptions, consumers don’t pay for content.
• The nature of Internet advertising makes it possible to gather much richer data about consumers than was ever possible offline.

This has made life in the middle much more difficult, particularly for old-school advertising middlemen like newspapers. Commanding top rates depends not only on capturing consumers versus infinitely more competitors, but also knowing more about those consumers than anyone else. Targeting information is the new scarcity in advertising. It is the only way to sustainably increase average revenue per user.

Twitter’s Potential

Whereas Google is valuable because it knows what I want, when I want to get it, Facebook knows who I am, and who I know. Ideally, they also know who and what I like, but it’s a much weaker signal. Twitter, on the other hand, knows exactly what I like and what I’m interested in. It’s obvious both from what I tweet about, but especially based on who I follow.

If an advertiser wants to reach someone like me – and they certainly do, given my spending habits – Twitter is by far the best way to find me. Were Twitter able to consistently capture this signal and deliver effective ad units that caught their user’s attention, they could command some of the highest average revenues per user on the Internet.

Twitter’s Problem

The problem for Twitter is that getting a user as finely tuned as myself is not at all an easy process. My interests are so easily identified because I constantly edit who I follow to make sure my signal-to-noise ratio is as high as possible. 2 However, this sort of behavior is totally unnatural and overwhelming to a new user. I hesitate to tell others how valuable I find Twitter, simply because I don’t know how to explain to them how to make Twitter as useful to them as it is to me.

Moreover, even for me, the experience is overwhelming. Because I find every tweet so valuable, I want to read them all, but if I’m away for more than a few hours it becomes burdensome in a way Twitter has purposely avoided.

Twitter, then, is in a bit of a paradox. To maximize its advertising potential, it must somehow educate new users on how to finely tune their experience. Yet, having finely tuned the experience, the amount of pure information goodness becomes overwhelming in a way the “normal” experience with its fleeting noise simply isn’t.

Twitter’s Uncanny Valley

For the past several years Twitter has been solving this conundrum by pushing users towards immediacy and focusing on their real-time advantage. That is why their homepage focuses on “What is happening right now.” The idea that Twitter is for real time information – Twitter #1 – is easy to explain to new users, and avoids the need for all of the difficult product marketing decisions that are required to deliver Twitter #2, the perfect individualized news source.

In some ways, Twitter has stayed on the safe side of the uncanny valley ; they haven’t tried to be all they could be, which also means they haven’t crashed-and-burned.

And yet, it’s Twitter #2 that has all the growth potential because of its ability to capture a superior signal about users. It’s not at all clear how to cross the valley, but I’m 3 only buying the stock if they reach the other side.

There are signs Twitter is going for it. For one, the new tweet box, which previously asked “What’s Happening,” recently switched to “Compose a new tweet…” Hopefully this is a sign of a reduced focus on the last five minutes.

Moreover, Twitter is doing excellent work on the little-used Connect and Discover tabs. The best way to find new people to follow – to build that lucrative interest graph – has always been to look to the people you already follow, and Connect gives great insight into whom those you follow interact with. It’s a start to solving the problem; so is @MagicRecs , a mystery account that DMs you suggested people to follow.

As for Discover, honestly, I hadn’t used it at all until I read Matt Buchanon’s must-read piece on the “Twitter of Tomorrow.”

People have suspected for some time that the main Twitter timeline, which has remained text-only, might eventually look like Discover. With the evaporation of Discover in the forthcoming iOS app, as well as the shift to a more immersive stream that takes over the phone’s entire display, the stage finally seems set for that to happen, and for users to see photos, videos, and other media directly in the stream—much like Facebook’s Newsfeed.

Horrified at this possibility, I opened up Discover for the first time in ages and…it was really good. I spent quite a bit of time reading tweets, interesting articles, and even following a new person or two. It was highly relevant and highly curated, all at the same time.

In other words, it potentially begins to cut through the paradox: the more curated your following list, the better the content, yet the content is much less overwhelming. It’s smarter, and riskier, all at the same time. It’s taking Twitter’s biggest strength – a truly phenomenal product – and instead of trying to explain it better (which may be impossible) or dumb it down (as they have for the past few years), it’s changing it, potentially creating the virtuous alignment between user benefit and user information that leads to the most profitable types of companies in advertising. 4

And yet, it may go horribly wrong (if Buchanan is right, you can see the backlash coming now). Running that risk, however, is the only path to greatness.

1. Thanks Wikipedia ! [ ↩ ]
2. I actually finally gave up doing this with my following list; I now keep a secret list with a smaller number of people I absolutely don’t want to miss [ ↩ ]
3. The rhetorical “I”. Because I write about them here, I don’t plan on buying any regardless [ ↩ ]
4. To reemphasize the point, I am not saying this is like the Dickbar; rather, I’m arguing it is a potentially better product, particularly for normals. Us geeks will always have our 3rd-party speakeasy apps [ ↩ ]