The Wall Street Journal
Twitter Inc. launched its long-awaited advertising system, marking the four-year-old company's first significant attempt to turn its so-called microblogging service into a profitable business.
The new service lets brands pay to have their tweets listed as the first result when a user conducts a search on Twitter. Over time, Twitter plans to show the promoted tweets in the stream of messages people see when they log into the site and to allow partners—from small developers to large Internet companies—to display the sponsored messages as well.
The start-up is balancing a mix of variables to determine when to show a promoted Tweet and, eventually, how to price it. Advertisers will bid to have their Tweet displayed when users search certain keywords. Then the company will determine a "resonance" score, based on factors like how many people clicked on or forwarded the promoted tweet.
Twitter's chief operating officer, Dick Costolo, said in an interview Tuesday that the company considered ad models that included charging brands for every new follower they attracted through a promoted tweet, but worried that it didn't capture the full value of what a tweet was worth to marketers.
Several months ago, an engineer approached him with the idea of blending lots of variables and it stuck, he said. Now, the company plans to start testing the formula. "The clock on the testing is just starting to tick," he said.
Twitter began showing users Promoted Tweets from a handful of brands Tuesday, including Starbucks, Virgin America and Best Buy. Marketers trying out Twitter's new ad product at launch aren't paying for the initial tests, according to two digital-ad executives, who said Twitter is still working on its bidding platform and on technology to help marketers track how the ads perform. Mr. Costolo declined to comment on the initial deals but said the company will initially charge marketers based on the number of times their ad is viewed, before moving to a resonance model.
He said that the company plans to discuss more details about opportunities for Twitter's partners, including how much revenue it would share from the ads, at its developer conference in San Francisco Wednesday.
Twitter's announcement received an enthusiastic reception from some marketers, who have been using the free service to blast out deals and messages.
Starbucks praised it as a more direct way for it to interact with consumers. "When people search for 'Starbucks' in Twitter they will be more likely to see our Tweets with this new product," Chris Bruzzo, vice president of brand, content and online, said in a statement.
Others expressed skepticism. "I am happy with the model right now and I am not sure what this does for the consumer," said Rudy Wilson, vice president of marketing for Frito-Lay North America. Frito is a unit of PepsiCo. "From a branding standpoint you can engage on Twitter without an ad model."
The service also sets up a major challenge for the young company: How to make good on a promise not to show its tens of millions of users irrelevant ads. Some users are skeptical. "My gut tells me that after they get a taste of the ad revenue, they'll open the floodgates and soon Twitter will become a constant stream of commercials," said Chris Dunn, 39, a Twitter user and chief executive of social-networking company Mobeze Inc.
Twitter has a lot riding on the ad service. The San Francisco company has raised around $150 million in venture capital, but is under pressure to show momentum as its user growth stagnates in the U.S. After growing nearly ten-fold in 2009, the company's unique U.S. Web visitors have hovered around 21 million in recent months, according to comScore Inc.
Having rebuffed acquisition and advertising partnership offers from Google Inc. and Microsoft Corp., Twitter also faces pressure to prove it can go it alone.
Sarah Hofstetter, a senior vice president at digital agency 360i, said Twitter's focus on monitoring how users are responding to the Promoted Tweets to determine their relevance is compelling and distinguishes it from Google's search-ad system, which looks at the quality of the Web site an ad links to and the rate at which users click on the advertiser's ads.
But she said the company will have to convince marketers of the value of Twitter SEO, many of whom are just dabbling in spending outside of major sites like Google and Yahoo Inc., to continue investing. "Its challenge is longevity," she said. "It gets exciting for a while and then you might move on the next shiny object."
Twitter's service comes as other services that were once "shiny objects" among online marketers have started to become good businesses. Google's YouTube and social-networking site Facebook Inc. were for years viewed skeptically by marketers leery of advertising against user-generated content. Now both are generating hundreds of millions of dollars in annual revenue as advertisers follow their surging users.
Twitter isn't betting its business on ads alone. The company earns some revenue from sharing its stream of tweets with search engines like Google and Microsoft's Bing and is planning to offer paid commercial accounts for businesses. Mr. Costolo said the company is testing what will eventually be paid commercial accounts for businesses. The accounts will allow brands to access data about their tweets and any promotional tweets the advertiser had through the account. Such accounts will also give brands more ways to interact with users on their Twitter profile page he said, citing the ability to display Tweets geographically near their business as a possible example. He declined to comment on the timing, beyond saying that it will depend on the pace of its ad roll-out.
The start-up is balancing a mix of variables to determine when to show a promoted Tweet and, eventually, how to price it. Advertisers will bid to have their Tweet displayed when users search certain keywords. Then the company will determine a "resonance" score, based on factors like how many people clicked on or forwarded the promoted tweet.
Twitter's chief operating officer, Dick Costolo, said in an interview Tuesday that the company considered ad models that included charging brands for every new follower they attracted through a promoted tweet, but worried that it didn't capture the full value of what a tweet was worth to marketers.
Several months ago, an engineer approached him with the idea of blending lots of variables and it stuck, he said. Now, the company plans to start testing the formula. "The clock on the testing is just starting to tick," he said.
Twitter began showing users Promoted Tweets from a handful of brands Tuesday, including Starbucks, Virgin America and Best Buy. Marketers trying out Twitter's new ad product at launch aren't paying for the initial tests, according to two digital-ad executives, who said Twitter is still working on its bidding platform and on technology to help marketers track how the ads perform. Mr. Costolo declined to comment on the initial deals but said the company will initially charge marketers based on the number of times their ad is viewed, before moving to a resonance model.
He said that the company plans to discuss more details about opportunities for Twitter's partners, including how much revenue it would share from the ads, at its developer conference in San Francisco Wednesday.
Twitter's announcement received an enthusiastic reception from some marketers, who have been using the free service to blast out deals and messages.
Starbucks praised it as a more direct way for it to interact with consumers. "When people search for 'Starbucks' in Twitter they will be more likely to see our Tweets with this new product," Chris Bruzzo, vice president of brand, content and online, said in a statement.
Others expressed skepticism. "I am happy with the model right now and I am not sure what this does for the consumer," said Rudy Wilson, vice president of marketing for Frito-Lay North America. Frito is a unit of PepsiCo. "From a branding standpoint you can engage on Twitter without an ad model."
The service also sets up a major challenge for the young company: How to make good on a promise not to show its tens of millions of users irrelevant ads. Some users are skeptical. "My gut tells me that after they get a taste of the ad revenue, they'll open the floodgates and soon Twitter will become a constant stream of commercials," said Chris Dunn, 39, a Twitter user and chief executive of social-networking company Mobeze Inc.
Twitter has a lot riding on the ad service. The San Francisco company has raised around $150 million in venture capital, but is under pressure to show momentum as its user growth stagnates in the U.S. After growing nearly ten-fold in 2009, the company's unique U.S. Web visitors have hovered around 21 million in recent months, according to comScore Inc.
Having rebuffed acquisition and advertising partnership offers from Google Inc. and Microsoft Corp., Twitter also faces pressure to prove it can go it alone.
Sarah Hofstetter, a senior vice president at digital agency 360i, said Twitter's focus on monitoring how users are responding to the Promoted Tweets to determine their relevance is compelling and distinguishes it from Google's search-ad system, which looks at the quality of the Web site an ad links to and the rate at which users click on the advertiser's ads.
But she said the company will have to convince marketers of the value of Twitter SEO, many of whom are just dabbling in spending outside of major sites like Google and Yahoo Inc., to continue investing. "Its challenge is longevity," she said. "It gets exciting for a while and then you might move on the next shiny object."
Twitter's service comes as other services that were once "shiny objects" among online marketers have started to become good businesses. Google's YouTube and social-networking site Facebook Inc. were for years viewed skeptically by marketers leery of advertising against user-generated content. Now both are generating hundreds of millions of dollars in annual revenue as advertisers follow their surging users.
Twitter isn't betting its business on ads alone. The company earns some revenue from sharing its stream of tweets with search engines like Google and Microsoft's Bing and is planning to offer paid commercial accounts for businesses. Mr. Costolo said the company is testing what will eventually be paid commercial accounts for businesses. The accounts will allow brands to access data about their tweets and any promotional tweets the advertiser had through the account. Such accounts will also give brands more ways to interact with users on their Twitter profile page he said, citing the ability to display Tweets geographically near their business as a possible example. He declined to comment on the timing, beyond saying that it will depend on the pace of its ad roll-out.
