While Twitter and Foursquare continue to tinker with their business models, some startups are building out new revenue models on the platform themselves.
We met with the founder of one of those companies yesterday, Nihal Mehta of LocalResponse.
LocalResponse is an ad network for local check-ins. It monitors multiple platforms, finds business and brand related updates, then responds to users with timely, targeted ads.
For example, a magazine company recently used Local Response to target delayed fliers in airports. When disgruntled people tweeted complaints about flights, they instantly received a response, “Looks like your baggage might take a while. Buy a digital magazine on us while you wait.”
The response rate for the targeted ads, Mehta says, is high. “The click-through rates we’re seeing are 46%, not .01% like typical banner ads.”
LocalResponse has only been live for two months and already has a dozen major partners like Microsoft and Wal-Mart. It monitors multiple location-based services, but Twitter is quickly becoming LocalResponse’s bread and butter.
In its first month (May), LocalResponse’s $1-5 CPC model generated $50,000 from the microblogging network. It’s typical for ad networks to split revenue with publishers. It’s not typical for publishers to reject the money.
“Twitter is technically one of our ad network’s publishers, so they should have a 50/50 revenue share with us,” Mehta says as he reaches into his bag and pulls out a crumpled $25,000 check. “I sent them this for May, but they sent it back saying they didn’t know how to recognise the revenue.”
“I’m going to keep sending Twitter checks every month until it figures out how to accept them.”
Twitter has been in search of a good business model. LocalResponse seems to have found at least one source of revenue. If the checks get bigger, we’ll see if Twitter still sends them back.
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