The story of Outbrain and Twitter’s business model

Since nothing interesting is happening over at Twitter this week, I thought I’d share the story of how Outbrain pioneered Twitter’s business model, even before Twitter made its first $.

Disclaimer: This story is a decade+ old, based on the best of my memory. Dates and details might be a little off. Also – not claiming any credit! Just sharing a fun little story we’ve never told. 

Twitter and Outbrain were both founded around 2006/7. Given my previous experience inventing the space of Contextual Advertising (at my previous company, Quigo) we were focused from day 1 on our business model: advertisers paying to be included in a recommendation feed. By ~2009 we had established Outbrain’s 2-sided marketplace, with advertisers paying us.

Our ad format (“native”) was broken into components: a title, short text, image & URL. Outbrain’s ad components were not far from those of a tweet, and could easily be formed into one. At the same time Twitter was a) exploding (following SXSW etc), and b) seemed completely clueless about a business model. The match seemed perfect to us. 

Mark Zuckerberg summarized that period perfectly (from Nick Bilton’s great book, Hatching Twitter): “Twitter is such a mess, it’s as if they drove a clown car into a gold mine and fell in.”

(interesting side note re the verified model Elon just announced: Outbrain’s model at the time was a $10/month subscription for those blogs and newspapers that wanted their content promoted in our recommendations. We later added CPC, and ultimately killed the subscription)

In 2009/10 we met ~3-4 times with Twitter management, proposing that we serve an Outbrain “paid tweet” every few organic tweets that they serve, and share the revenue. They seemed intrigued, but nothing came of it. 

But since it made too much sense that Twitter should ultimately monetize with sponsored tweets, yet things seemed stuck, we decided to try to prove the Twitter business model unilaterally, without Twitter’s help. How do you do that? There were 2 ways to get sponsored tweets into the Twitter feed:
1) by partnering with Twitter itself. That seemed like a dead-end.
2) by partnering with Twitter users with a following.

One of the Outbrain executives at the time – Josh Guttman – had an idea about the latter, and asked to head to Los Angeles for a couple of weeks to try to make it happen. Josh didn’t want to share the specifics with me, but succeeded beyond my imagination: 

Shortly after, Hugh Jackman and Charlize Theron had agreed to partner with us on the experiment. We had to build for them a custom search interface into the Outbrain ad database. Back then, nearly 100% of the Outbrain ad database was actually news stories from publishers and bloggers. So they’d find stories about topics they cared about and wanted to promote. For example, Hugh Jackman was into stories about coffee, and especially sustainable coffee farming. 

The plan worked! Outbrain had a monetization engine up and running on Twitter before Twitter figured out how to monetize it themselves. 💪

…but it worked too well in some ways, and poorly in others. On the worked well side: Engagement with the OB ads was insanely high. I don’t remember specifics, but think CTR’s for a story promoted by a celebrity was double digit %’s.
On the worked poorly side: Since we didn’t control the platform (and were doing this without Twitter’s help), once the promoted tweets were out – they were permanently showing to 100% of the followers of that celebrity.

That meant that any targeting the advertiser was hoping for couldn’t happen. Worse: When an advertiser’s budget was consumed, we couldn’t pull off the ad, and clicks would continue coming. For example, when Hugh Jackman would tweet a story about coffee, a huge surge of clicks would come, mainly from Australia, quickly eating up the budget of an advertiser that was looking for US traffic.

We went back to Twitter with the great results of our experiment, to see if we could now formalize it into a formal partnership that would make them $$’s. Nothing came of that either. We pulled the plug on the experiment. 

Shortly after, Twitter announced that they’d start monetizing with sponsored tweets. 

(Not taking *any* credit on that, btw! The idea was obvious and it was really just a matter and execution for them to get there.)