Editor's Note: Pete Cashmore is founder and CEO of Mashable, a popular blog about social media. He writes a weekly column about social networking and tech for CNN.com.
(CNN) -- Twitter this week began testing a new type of advertising: "Promoted Trends." Under the new system, brands can pay to appear below the "Trending Topics," the most talked-about terms on Twitter at any given moment.
The idea is, in a word, ingenious -- the perfect way to generate revenue from the popular social network without infuriating users.
The threat of in-stream ads
It's no secret that Web users dislike ads. Why shouldn't they? Offline ads are all too often distracting and interruptive -- from TV advertising at 10-minute intervals to magazines that seem to carry as many ads as articles. Such commercial interruption is often tolerated but rarely is it welcomed.
When rumors first surfaced of Twitter's plans to make money, there was talk of putting ads into the streams of Tweets -- a repeat performance of the annoying, interruption-based advertising we're used to on TV, radio and in magazines. It's hard to imagine users reacting positively to a Coca-Cola ad inserted between personal updates from friends.
But this gruesome rumor has yet to transpire -- Twitter is in fact blocking this type of advertising, while embracing new ad formats dubbed "Promoted Tweets" and "Promoted Trends." It's a smart plan that seems unlikely to irk Twitter addicts.
Banning ads in streams
Twitter recently banned "in-stream" advertising -- a move that received mixed reactions. While the restriction does prevent Twitter search results from becoming littered with paid advertisements, it also threatens a handful of third-party services that pay users to place ads in their streams.
Ad networks such as Ad.ly and Sponsored Tweets say they're getting around the new rules by allowing users to copy and paste commercial messages, although this workaround does appear to bypass the true spirit of the so-called "ban." And while Twitter says the rules aim to preserve "the integrity and relevance of the timeline," its critics argue that Twitter is simply killing off the competition to its new ad offerings.
The in-stream ads blockade provided ammunition, too, to those who say Twitter is hobbling its valuable ecosystem of third-party developers. Those who build Twitter-powered applications for the iPhone, Google's Android OS and other mobile platforms have recently seen their efforts challenged by Twitter itself, which is buying or building "official" Twitter apps for each platform.
Promoted tweets and trends
To the relief of some users, Twitter is not competing head-on with in-stream advertising networks, however. Instead, its Promoted Tweets appear in search results -- search for "Toy Story 3" and the top Tweet is a message from @DisneyPixar. This, I think, is a better solution to Twitter's revenue problem: You'll see ads only when you're searching for a relevant term.
A second element of the Promoted Tweets system emerged this week. Disney has additionally purchased a Promoted Trend on the service, meaning that "Toy Story 3" appears beneath the most-discussed topics on the site. This too is smart: Brands long to be a part of the conversation, and Promoted Trends create buzz around a product or service without vexing the user.
Room for improvement
Twitter's new ads aren't beyond criticism. For instance, the current system provides few opportunities for small businesses -- Promoted Trends are said to cost "tens of thousands" of dollars, putting them out of reach for all but the biggest brands. Promoted Tweets, meanwhile, have yet to become available to the so-called "Long Tail" of small and medium-size businesses.
The problem is easily rectified: Search ads could be sold in a marketplace akin to Google AdWords, where bids are made against specific search terms. And the Trending Topic ads would carry less of a premium if they were available on a local level -- buying buzz in a single city rather than around the globe.
A tentative success
The bottom line is this: Twitter has introduced ads, and there's not the faintest sign of a backlash. No calls to jump ship to Facebook or other rivals. No threat of a unified uprising. No "#down-with-ads" hashtag among Twitter's Trending Topics.
That, I think, is an accomplishment: Twitter may find itself able to serve its advertisers without exasperating its users.
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