Multi-Billion Dollar Question: Will Users Click on Twitter Ads?

Twitter – which has seen explosive growth since its launch four years ago – has just unveiled a plan to launch an advertising system with the goal of helping it become a money-making enterprise.

Twitter, which has seen explosive growth since its launch four years ago, unveiled a plan to use advertising to turn its massive popularity into profit. Photo: Dan Kitwood / Getty Images

Millions of people use Twitter to post 140-character-or-less updates on everything from news stories to their breakfast plans.

And Twitter – which has seen explosive growth since its launch four years ago – has just unveiled a plan to launch an advertising system with the goal of helping it become a money-making enterprise.

The advertising program, which Twitter calls “Promoted Tweets,” will show up when Twitter users search for keywords that the advertisers have bought to link to their ads. Later, Twitter plans to show promoted posts in the stream of Twitter posts, based on how relevant they might be to a particular user.

Many companies – including Best Buy, Virgin America, Starbucks and Bravo – already use Twitter to post promotions, but their tweets get pushed down in the ever-updating search results, according to The New York Times.

“The idea behind Promoted Tweets is that we want to enhance the communications that companies are already having with customers on Twitter,” said Dick Costolo, Twitter’s chief operating officer.

Since Twitter started in 2007, its growth has resembled a hockey stick, increasing almost in a vertical line. According to comScore, had 22.3 million unique visitors in March, up from 524,000 a year ago, and that does not include the millions more who use the service through third-party smartphone and Web applications like TweetDeck or Tweetie.

Yet Twitter has been slow to monetize those users. Its founders, Evan Williams, Jack Dorsey and Biz Stone, have said that it is following Google’s path — building a service that many people use, then figuring out how to make money. Though Twitter already has some revenue from deals to license its stream of posts to Google, Microsoft and Yahoo, Twitter’s announcement is the first significant step toward a business model.

“Twitter has great potential as a marketing and advertising channel with opportunities to create viral buzz around a product or service,” said Eden Zoller, analyst at technology research firm Ovum. “The flip side of Twitter’s immediacy is that if advertising messages are not very carefully positioned users can hit back at brands and in real time, and brands will have little control over this.”

Sponsored tweet by Starbucks. Image: AdAge

The ads will let businesses insert themselves into the stream of real-time conversation on Twitter to ensure their posts do not get buried in the flow.

Starbucks, for instance, often publishes Twitter posts about its promotions, like free pastries (see the picture on the right ). But the messages quickly get lost in the thousands of posts from users who happen to mention meeting at Starbucks.

“When people are searching on Starbucks, what we really want to show them is that something is happening at Starbucks right now, and Promoted Tweets will give us a chance to do that,” said Chris Bruzzo, vice president of brand, content and online at Starbucks.

When a Twitter user searches for a word an advertiser bought, the promoted message will show up at the top of the results, even if it was written much earlier. The posts say they are promoted by the company in small type, and when someone rolls over a promoted post with a cursor, it turns yellow.

Multi-Billion Dollar Question: Will Users Click on Twitter Ads?

So, the Twitter’s Ad Platform has been revealed and Twitter is focused on making money, there is only one but multi-billion question: will users click on Twitter ads or, sorry, “Promoted Tweets”? The answer to this question will decide not only the fate of Twitter as a company, but change the direction of all social media.

“There are a ton of factors involved in predicting click-through rates — it’s almost a science. Twitter seems to believe that a combination of relevancy and its in-house resonance score will be enough to address that issue,” according to Mashable’s report.

Twitter is aware of  the risk that users won’t click on “Promoted Tweets”. It’s still figuring out how to determine which promoted posts should appear. It could be based on topics they are writing about, geographic location or shared interests of people they follow.

“One of the reasons we’re not rolling that out right now is because we only want to show tweets that help the user experience,” Mr. Costolo said.

Once Twitter figures out how to measure the number of people who read posts other than on, it will also allow third-party developers to show ads and share revenue.

Early on, Twitter’s founders said they wanted to avoid showing ads as other social networks do, displayed on the right side of the page. The new ad platform is different, Mr. Costolo said, because the promoted posts also exist in the organic Twitter stream.

“The ability of companies to engage with customers around this interest graph is more compelling than trying to wedge yourself into these social interactions,” he said.

The company does not release figures on its total number of users but they are estimated to be in the tens of millions and the company said recently its users are creating 50 million messages a day. [via Mashable, NY Times and PCWorld; image via NY Daily News and AdAge]

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