The microblogging service Twitter has announced that it will not allow any third party to insert advertisements in user timelines. The company has also upgraded its Terms of Service in regard to use of Twitter API.

According to the blog post, there are two key reasons. “Firstly, third party ad networks are not necessarily looking to preserve the unique user experience Twitter has created…”. Secondly “the basis for building a lasting advertising network that benefits users should be innovation, not near-term monetization.”

After the notification, its own Promoted Tweets will no longer have any competition from the third-party ad networks. Also, this ban is only meant for paid-for-tweets inserted in the user timelines, not against the ads shown on the Twitter timelines.

Twitter is betting big on the upcoming Anotations, as more business opportunities will be available on the Twitter platform, in addition to the existing ones. “Twitter clients could begin to differentiate on their ability to service different data-rich verticals like Finance or Entertainment”, the blog said.

This decision will surely get a thumbs up from the users who are left baffled by the ads in their timelines. But, will be a bitter pill to swallow for the third-party ad developers who have managed to develop business models based on ad in user timelines.

"As our primary concern is the long-term health and value of the network, we have and will continue to forgo near-term revenue opportunities in the service of carefully metering the impact of Promoted Tweets on the user experience," Twitter COO Dick Costolo wrote in a blog post. "For this reason, aside from Promoted Tweets, we will not allow any third party to inject paid tweets into a timeline on any service that leverages the Twitter API."

Costolo further illustrates the reasoning behind this decision. Twitter wants to:

• Preserve Twitter's unique user experience
• Focus on long-term monetization, rather than the short-term goals of third parties
• Ditch covering all costs of maintaining its network — third parties apparently shoulder little responsibility

Twitter updated its terms of service to detail these new conditions.

Here's the bottom line: "In cases where Twitter content is the basis (in whole or in part) of the advertising sale, we require you to compensate us (recoupable against any fees payable to Twitter for data licensing). For example, you may sell sponsorships or branding around gadgets or iframes that include Tweets and other customized visualizations of Twitter."

Unlike many TOSes, Twitter's is actually readable. Most of the language focuses on maintaining integrity and not confusing users — a possible indication that it may not be all about the Benjamins.

All Things Digital scored an interview with Costolo wherein the COO broke down a few specifics and who will be affected:

• Services that do not generate revenue, or do so without advertising (such as subscriptions), will not be affected.
• To pay, groups can establish a revenue split with Twitter or agree to license their data stream. Using Promoted Tweets is encouraged.

The fine details — such as minimum fees and revenue splits — have not been established and Twitter is likely to implement fees on a case-by-case basis.

These new rules will hit the wallets of many big-name companies — like Business Insider and The Huffington Post — and could drive some independents totally out of business.