I believe that people who produce content should be able to make a living for producing that content. If we want journalists, bloggers, photographers, and videographers to bring us interesting stuff that makes our lives richer, we gotta figure out a way to get them paid. That’s why I care deeply about the topic of advertising and why I follow it so closely.

I joined ad.ly tonight. Partly because a friend of mine told me I should check out how much other Twitterers were getting paid. And lots of them are getting paid a ton. I’ve heard of some celebrities getting paid $30,000 for week’s worth of tweets. One guy, with 50,000 followers, claimed on his Twitter stream tonight that he was getting paid $3,000 a week.

I really don’t like in-Tweet advertising, but wanted to learn more because I’m seeing more and more of them. Why don’t I like them?

1. I like a strict firewall between editorial (er, words you write) and advertising (words someone else writes that they pay to put in front of your audience).
2. I don’t think the ad models out there price things properly. 10 people are not the same. Here, let’s say I have 10 people who are poor. Is that list worth the same as, say, 10 people who will buy a house in the next month? No way. Yet on Twitter and other streams we just don’t know enough about audiences to price ads properly.
3. If Twitter or Facebook becomes infested with instream ads it will piss everyone off and we’ll all leave, so any investment in building audiences in those systems will be destroyed by the greed of other people (I don’t run ads, but if I’m the only one who doesn’t then it doesn’t matter because no one will stay there. Already on Twitter I’ve seen even good friends, like Chris Pirillo, run tons of ads — I unfollowed him because I got tired of it).
4. I believe advertisers are getting ripped off, because some ad systems aren’t sharing the REAL value of a person’s audience and is using just lame metrics like number of followers to price out ads. When advertisers get ripped off, they figure it out pretty quickly and tell everyone that the system is screwed and to avoid at all costs. That sort of happened with Second Life (I worked at Microsoft and we put lots of money into an island’s design and didn’t get the return we should have).

So, first, on the other side, Mark Suster is an investor in Ad.ly, and he wrote a blog sticking up for in-tweet Twitter advertising. You should read his post. He’s probably right, but I don’t like in-tweet ads.

I also called and talked tonight with Ad.ly CEO Sean Rad and he told me a few things:

1. They only have one tweet a day, because they know that too many ad tweets will piss off followers.
2. Their payments are NOT based on just followers.

The New York Times has an article on Twitter advertising. In it I said I unfollow people who put ads in their Twitter stream. I should have been a little bit more clear. Putting ads in your stream, if you disclose them, won’t automatically get me to unfollow you, but it does cause me to look at the value I’m getting out of your stream. With Pirillo there is some value. So, I might follow him even though he does fill his stream with crappy ads and treats us pretty badly by not always disclosing what he’s getting paid for and what he just is putting in the stream because he’s excited. But with the other guy tonight all I saw were ads. So, I unfollowed and won’t be looking back. Actually I unfollowed Pirillo too. I don’t think he’s disclosed everything clearly or explained where his ads were coming from and until he does I’ll stay away. (UPDATE: Pirillo claims he discloses everything with an #ad hashtag, but I’ve seen stuff on his stream that looks like ads that weren’t disclosed, which demonstrates some of the problem here. It’s a perception issue).

I see some ad systems are selling ads based on followers. Even ad.ly puts that metric right on their home page, even though the CEO says that they have an extensive system for rating Twitterers. Rad, the CEO, says that the reason they don’t show the real ranking that they have is that it would piss off publishers (he admitted that many “mid-tier” publishers, like Leo Laporte, are actually more influential and drive higher ad rates than many celebrities, but he told me he isn’t willing to piss off the celebrities because they have better selling power with advertisers than people who have built more engaged audiences on Twitter, but don’t have the big names).

I think that this is a major problem for the new Twitter ad industry and is probably one reason Twitter itself has stayed away from selling ads.

My friends have been studying audiences on Twitter and real adoption behavior happens mostly through organically gotten followers, not by being a celebrity or being on Twitter’s Suggested User List. Think about it. Who would you rather have as a follower? Someone who really chose you and finds you interesting, or someone who has no clue what Twitter is about and added you because you’re on a list?

Compare Brooke Burke’s followers (she got almost all of her followers by being on the suggested user list), for instance, to the followers of Leo Laporte (he’s never been on the suggested user list).

What do you notice?

1. Leo’s followers actually use real pictures.
2. Leo’s followers actually write real content.
3. Leo’s followers (you have to study bit.ly link behavior to know this) actually click on links at a much higher rate than Burke’s do. IE, they trust what he has to say and are much more engaged with his content.
4. Burke’s followers only put her on 1,679 lists (and look at the crappy lists she’s on), while Leo’s followers put him on 6,398 lists and lists that are a lot less spammy and a lot more engaged. Keep in mind that Burke has 1.6 million followers while Leo has 150,000 followers. If Burke’s audience was as engaged as Leo’s is, she would be on 60,000 lists right now, not 1,679 (leaving quality of the lists aside).

So, what do advertisers care about?

1. Sales. IE, does the audience TAKE ACTION on what is being placed before them. Leo’s audience already is proven to take action at many many times the rate that Burke’s does (by looking at engagement, bit.ly link clicking, list development, etc).
2. Wastage. How much money do you have to spend to find people who take action? This is why old-school advertising is dying. What would you rather do? Spend $40,000 on a billboard by a freeway or put that $40,000 into Google ads where the advertiser ONLY pays if someone clicks on the ad. There’s a reason why Google is making billions of dollars. In Twitter there’s TONS of wastage.
3. Hitting the right audience. If you are selling women’s shoes, would you be better off hitting Burke’s audience (as crappy as it is, there are SOME real people there) or Leo’s?

But, see, if a women’s shoe company wants to advertise on Burke’s twitter account, they have to pay for all the followers Burke has, most of which aren’t really good.

If advertisers are paying a hefty fee for Burke just because she has lots of followres they are being ripped off. One thing I’ve learned is that advertisers don’t like being ripped off, so will force ad networks to use scores other than pure numbers of followers to price ads. And that’s if they stick around. Many advertisers may just leave and tell their friends at industry conferences to stay away.

Personally I hate in-tweet advertising. The real money is OUTSIDE THE TWEET. I expect that Twitter will clean up there big time with its new advertising play, coming soon (although Biz Stone, Twitter co-founder, still is saying that Twitter isn’t focusing much effort on ads. I wonder what the real story is here?).

Also this week I talked with Likaholix co-founder Bindu Reddy. She is working on a new ad network for bloggers and Twitterers that lets publishers choose the ads by using the technology of liking that they made for Likaholix, a service where you can share what products and services and experiences you “like.” Hey, like that Diet Coke? Get paid for it! 🙂

But all this stuff makes me worried for the future of Twitter. I think Twitter needs to come out for or against these new ad networks and needs to build a platform that properly identifies advertising tweets via a different color. I’d love to be able to “tag” Tweets using my SuperTweet idea and write “advertisement” in the SuperTweet, which would tell everyone that that Tweet is an ad.

Anyway, ads are coming to streams like Twitter and Facebook whether we like it or not, so it’s time for those of us who do care about these systems to speak up and say what is acceptable and not. Here, again, is my “unacceptable” list:

1. Filling more than 5% of your stream with advertising Tweets (unless you are building a stream of ONLY advertising).
2. Not disclosing ON EVERY TWEET that you are paid to send.
3. Taking ads from companies you are covering editorially. So, if I want to write a Tweet (unpaid) about Intel it better not be right next to a paid Intel Tweet.

What’s your unacceptable list? Will you be doing in-Tweet advertising?

UPDATE: Nick Halstead, founder of TweetMeme, pitched the TechCrunch Real Time Crunchup with a new idea for in-tweet advertising called “Ad Tweets.” His pitch can be seen in this video from the event, about eight minutes in.

UPDATE #2: I will interview Ad.ly’s CEO on Tuesday, so if you have any questions, leave them in comments here.