Here is an example:

The sponsor's name is clickable and points to the sponsor's landing page.

All that our sponsors have to do is provide us with up to three "trigger phrases" that define their business. A phrase can be a single word or two linked words. For example:

• Hosting (single word)
• Dedicated server (two linked words)
• Web hosting (two linked words)

Think of these as search terms. It is search advertising within ReadWriteWeb. More importantly, it is in context, in posts that are relevant.

The idea is (a) to offer value to our readers by providing advertising links in the context of what they are reading and therefore more likely to find of interest, and (b) to offer a higher level of engagement to our advertisers, resulting in both more branding impressions and click-throughs.

Background on the Technology

We experimented with this manually to test whether the theory made sense and whether both readers and advertisers got some value from it. As you can imagine, doing this manually is difficult at any level of scale. So, we hunted for a technology partner who could build what we envisaged. This was not a simple technical challenge. What is easy for a human to do (read an article and quickly determine which phrases are most relevant) is quite hard for a search engine to do.

We needed an engine that would return ranked/scored results. We decided to limit the number of ads to three per post. Any more would detract from the reader's experience. We imagined that such an engine could come up with more than three matches for a sponsored trigger phrase in a single post, so we needed the engine to return the three most relevant sponsored trigger phrases.

That raised the bar considerably.

Our Partner: Hakia

We were delighted to find a partner that could jump this high bar. Even better, the partner is also a ReadWriteWeb sponsor (so it will have its own sponsored trigger phrases matched by the engine). Our partner is Hakia.

For those who don't know Hakia, check out its semantic search engine. It was a meeting of minds from the start. When we outlined our vision of what we wanted, it was clear that Hakia was headed in the same direction. Becoming partners to make it happen was a natural decision. Increasingly, we see our ability to partner effectively as being a core competency. We build our business with partners and couldn't imagine it any other way. Hakia clearly shares this partnering philosophy and competence.

Together with Hakia, we have big plans for what to do with this in future. We see it as something of a native revenue model for blogging. As always, we are keen to hear your feedback in the comments.

Interested in being a ReadWriteWeb sponsor? ReadWriteWeb is one of the most popular blogs in the world and is read by a sophisticated audience of thought leaders and decision-makers. Email our COO Bernard Lunn for all the details.

Now, there's another service that - much like RSS-based advertising - offers to pay you for advertisements that run in the midst of your tweet stream. Meet Magpie, an ad network for Twitter.

"You allow us to twitter in your name. Thus, it's primarily your followers who'll see the magpie-tweets. We're targeting them, not you."

But how much money could you be earning? To test it, I ran a couple of user names through the Magpie estimator to see.

Personally, I stand to rake in an additional 55 Euros a month - roughly $70 US. Richard could earn more than three times that amount, 184 Euros. And Marshall could be reimbursed around 181 Euros a month.

But what about the heavily followed Twitter crowd? Kevin Rose, for example, could stand to make an extra $8,000 a month, Leo Laporte around $15,000 a month, and Barack Obama? A projected $64,000 a month. (Which, ironically, is more than he would make if he gets the job he's gunning for.)

Now, I'm what you would call an "avid" Twitter user. And I have to admit that I'm capable of tweeting useless drivel and alienating followers with the best of them. But there's something about the fact that I'm actually the one doing that inane tweeting that makes it slightly more palatable. I think.

Magpie changes all that. With Magpie, the annoying tweets could - ultimately - be beyond your control. In fact, this "ad in the tweet stream" concept is exactly what people fear Twitter will be doing with their tweet streams in the not too distant future - inserting advertising into conversations that heretofore have been wholly controlled by each user.

Magpie is promoting the service as a way to get into the tweet stream of "popular twitterers." One has to wonder, if those Twitter users - especially those who are already seeing value in their Twitter use - are going to be willing to trade their influence for cash.

I, for one, will keep posting annoying drivel on my own - for free.

Wired.com interviewed several of Twitter's VC backers who remain "bullish" on the subject. Investor Bijan Sabet of Spark Capital notes that Twitter will introduce a business model of some kind within the first half of next year. Others are also betting that Twitter will find a revenue model this late in the game just like Google. Henry Blodget of SAI even suggested a future valuation of $1 billion or more for Twitter. We think anything is possible at this point.

A Dumb Question

Earlier we noted that Fred Wilson of Union Square Ventures initially felt the question of whether Twitter would monetize was the stupidest question in the world. He stated:

"It's like the stupidest question in the world: How's Twitter going to make money. It's like 'How was Google going to make money? Eventually Google was going to make money and they figured out how to do it and they figured out a great business, and I think the same thing is true with Twitter."

Wilson has recanted his statements, but we do agree that Twitter could very well duplicate Google's formula for success. However, Google is not Twitter and vice versa. We're talking about two completely different services. There's still a chance that Twitter won't find a successful revenue model. For all we know, luck may have been on Google's side. Up until recently, Twitter couldn't say the same with numerous outages and stability issues plaguing the service. Personally, I agree with Mark Evans sentiment that the question is not dumb at all. The question at hand could arguably be one of the most important questions any company could ever answer.

But Twitter won't survive if it doesn't find a great revenue model. This matters to all of us.

If Twitter fails to find a revenue model and hits the deadpool, it will have a chilling effect on innovation. That matters to all of us in the innovation economy. Sure, you could live without Twitter, but what about the funding chances for that brilliant idea of yours?

No Rush But It Has To Be Right

Twitter has top tier VC backing and enough cash to wait till they have scale and the right revenue model. But when they launch it has to be just right. In this climate, Twitter would probably not recover from a Beacon like fiasco. Nor can Twitter do well with a smorgasboard of revenue models, where none really moves the needle and all irritate users just a bit. It has to be one absolutely compelling model that enables Twitter revenue to scale the same way their usage scales.

Adwords Is The Gold Standard, But This Is Tougher

Adwords is the monetization gold standard. The fact that Google did not invent it is irrelevant. But how many new revenue models like this have we seen in the last 10 (or even 100) years? That's right. This is tough to get right.

But Twitter's challenge is even tougher. Google was not creating an entirely new type of service. It was Yet Another Search Engine, just a better one. They could just use/improve a revenue model developed at a different search engine. Twitter has created an entirely new type of medium, which is what makes it so exciting. So there is no obvious place to borrow a revenue model from.

This requires serious creativity. Yes the words "revenue" and "creativity" were just used in the same sentence, welcome to the new world!

Why Did Adwords Work? Two Acid Tests

These are the two things that Twitter's Magic Revenue Model has to achieve that Adwords did so brilliantly:

1. Do not irritate/interrupt the user and even occasionally add value to the user.

2. Provide a value proposition that is so compelling that even conservative buyers give it a try.

Show That The Wisdom Of Experts Works

My horoscope today told me to "pick a controversial topic and ask someone smart what they think about it." Well, I am taking that to extreme and asking lots of smart people what they think.

Wisdom of crowds is "so last cycle". Wisdom of experts is what really works. That is what we have here on ReadWriteWeb, lots of really smart innovation experts. Give us your one best idea for a Twitter Revenue Model and show us how it meets the 2 acid tests defined above.

Leveraging Context

Essentially, this would entail Twitter parsing over the Tweets of a given user, as well as the Tweets of the users he/she is following. Common keywords, themes, and phrases are then pulled from this data and associated with that user. As a result, highly-targeted ads can be displayed based on the user's network of content ("web design", for example). These simple text ads would look very similar to regular Tweets, but would be clearly marked as "Sponsored Content". Facebook employs a comparable strategy through their News Feed, although ads are based on demographic information as opposed to context. These Twitter ads would appear every 20 or so Tweets depending on the frequency chosen by the company.

Integrating ads into the content stream is a delicate process. Caution must be exercised and full notification must be provided. One wrong step may prove costly. Nonetheless, if ad integration can be accomplished in a seamless, unobtrusive manner, it can be extremely effective.

Ad System

The ads would be generated via a proprietary auction system developed by Twitter. Advertisers would bid on desired keywords and phrases, somewhat akin to Google AdWords. These specified terms, or bundles of terms, would ultimately be assigned to the highest bidder each month (as an example). The ads would run until the advertiser budget runs dry or the month ends. If the former is the case, excess inventory would be allocated to the second highest bidder. If no bidders are left, superfluous ad space can either be filled with Google ads, ads from partner networks, or house ads.

Obviously, most of the ads would be tech-centric -- after all, Twitter has yet to break into the mainstream. Its user base is filled with bleeding-edge tech enthusiasts. Armed with this knowledge, advertisers can directly target tech innovators, influencers, and early adopters while Twitter is able to command premium ad dollars.

Tiered Model

This strategy paves the way for a two-tiered "freemium" model. Any users that choose not to view the ads could be charged a small, yearly fee that would create an additional revenue stream. Ad-free account could be combined with premium features and added functionality beyond the basic offering to give users more value.

The combination of highly-targeted, contextual ads and a premium subscription should suit the needs of most users. Those who don't want to pay for the service don't have to. Those who don't want to view the ads don't have to either. At the end of the day, creating a flexible revenue model that doesn't cause a user backlash is the ultimate goal. If personalized, contextual ads appeal to the user, I have no doubt that users will not only accept this new model, but embrace it.