Twitter just announced that it will soon update its terms of service for developers and prohibit third-party advertising networks and developers from inserting ads into a user's stream. This could mean the end of a number of third-party advertising networks like Ad.ly and 140 Proof, both of which created their businesses around in-stream ads. According to Twitter's COO, Dick Costolo, the company decided to take this step in order to "preserve the unique user experience Twitter has created" and ensure the "long-term health and value of the platform."

Twitter's Reasoning

Twitter argues that it wants to create "a platform of enduring value." To do so, Costolo says, Twitter has to ensure that the platform remains valuable for its users. In-stream advertisers, however, are only interested in short-term revenue opportunities - which come at the expense of the long-term health of the Twitter platform. Costolo also argues that these in-stream advertising networks are simply not innovative enough, and "the basis for building a lasting advertising network that benefits users should be innovation, not near-term monetization."

The real reason for banning in-stream ads, however, becomes obvious after reading this paragraph:

"It is important to keep in mind that Twitter bears all the costs of maintaining the network, protecting the Tweet stream against spam, supporting user requests, and scaling the service. Indeed, Twitter will bear many of the support costs associated with any third-party paid Tweets, as Twitter receives support emails related to anything a user sees in a tweet stream. The third-party bears few of these costs by comparison."

Twitter simply doesn't want to bear the cost of supporting these advertising networks that don't bring the company any direct value and revenue. Prohibiting in-stream ads isn't so much about fostering innovation and preserving the integrity of the platform. Instead, it's about ensuring that advertisers flock to Twitter's own Promoted Tweets.

Shutting Down the Most Natural Way to Monetize Twitter Clients

It will be interesting to see how third-party developers will react to this. Just a few weeks ago, Twitter began launching its own official Twitter clients, and now the company has prohibited the most obvious method of monetizing unofficial clients. Instead of being able to insert ads into users' streams - the most natural place for these ads - developers will now have to show ads outside of the stream. As Costolo puts it, "There will be all sorts of other third-party monetization engines that crop up in the vicinity of the timeline." Starting today, however, the stream itself is off-limits for all advertisers besides Twitter itself.