We could observe how twitter earn money from ads.
By CLAIRE CAIN MILLER and TANZINA VEGA
Published: October 10, 2010
Noah Berger for The New York Times
“We feel like we’ve cracked the code on a new form of advertising, and we feel like we’ve got a hit on our hands,” Dick Costolo, Twitter’s chief, said last week.
In the last two weeks, the company has introduced several advertising plans, courted Madison Avenue at Advertising Week, the annual industry conference, and promoted Dick Costolo, who has led Twitter’s ad program, to chief executive — all signs that Twitter means business about business. It’s Twitter’s biggest financial effort since April, when it introduced its first, much-anticipated ad program, Promoted Tweets.
Twitter’s startling growth — it has exploded to 160 million users, from three million, in the last two years — is reminiscent of Google and Facebook in their early days. Those Web sites are now must-buys for advertisers online, and the ad industry is watching Twitter closely to see if it continues to follow that path.
“Having been in the business for as long as I have and seeing things rise, I completely have the same vibe on Twitter as Google, Facebook and DoubleClick,” said Curt Hecht, chief executive of VivaKi Nerve Center, a digital agency that is part of the Publicis Groupe. “You can tell by the client interest levels.”
Another telling sign of Twitter’s newfound interest in pushing its advertising is that although fewer than 20 of the company’s 300 employees work on advertising, that is in contrast to one just three months ago.
But many advertisers and executives say there are questions to be answered and experiments to be done before Twitter becomes a must-buy, if it ever does.
“Agencies are uneducated, brands are uneducated and to a certain extent, Twitter is uneducated,” said Ian Schafer, chief of Deep Focus, an interactive marketing agency. “There are no best practices. There are just hunches about what will work.”
Advertising Week was a debut for Twitter, as Mr. Costolo shared the stage with executives from Google and Facebook and wooed ad executives in the audience with a clear message.
“We’re definitely beyond the experimentation stage,” he told them. “It’s working.”
In an interview later, he said, “We feel like we’ve cracked the code on a new form of advertising, and we feel like we’ve got a hit on our hands.”
This is a sharp change for the company, which has so far been careful to say it will move slowly and experiment a lot. Twitter started with just six advertisers and now has about 40, including Starbucks, Ford and Microsoft. Mr. Costolo said in the interview that it would have more than 100 by the end of the year.
Last week, Twitter added three avenues of advertising. Promoted Accounts, which began immediately with Xbox and HBO, allows companies to pay Twitter to suggest that people follow their free Twitter accounts, based on shared interests. Twitter also began publishing ads on Twitter apps, starting with HootSuite; before, ads had appeared only on Twitter’s Web site. Twitter will split the ad revenue evenly with HootSuite and the other companies that make apps.
And finally, Mr. Costolo said that next year Twitter would offer a self-serve tool for local businesses to buy Twitter ads, and is working on ways to deliver those ads based on location. It will use Internet addresses, location information that users share and clues like whether someone follows a bunch of restaurants in a particular city.
Though just a few dozen advertisers have run Promoted Tweets, and some have not worked well, over all they have outperformed Twitter’s expectations.
Advertisers pay for Promoted Tweets to appear at the top of search results. Search “vacation,” for instance, and see an ad from Virgin America encouraging people to vote in Virgin’s Awkward Family Vacation Photo Contest. Advertisers bid on keywords and pay when someone clicks on a link in the ad, replies to it or forwards it to followers. Promoted Tweets will eventually show up in Twitter timelines, not just when people search, based on the interests of people that users follow.
Twitter also sells Promoted Trends, so advertisers can show up in the list of topics most discussed on Twitter, for $100,000 a day.
“It’s a cheap trick but it’s got a lot of eyeballs,” said Chad Stoller, director of digital strategy for BBDO North America.
According to Twitter, on average 5 percent of people who see Promoted Tweets are clicking on, replying to or forwarding the ads — much higher than the less than 1 percent of people who click on a typical display ad.
Trends are mentioned in Twitter conversations four to seven times as often when they are promoted.
Part of the reason so many people are clicking on ads might be the initial novelty, Mr. Hecht said. But at least one advertiser, Coca-Cola, said its response rates had been significantly higher than 5 percent, which surprised the company because it requires the user to make two clicks — first on the Promoted Trend and then on the link within the Promoted Tweet.
“At the end of the day, it’s a very different product” than traditional online ads, said Michael Donnelly, group director for worldwide interactive marketing at Coca-Cola. “People are engaged and looking for a specific topic, so it’s relevant.”
Coca-Cola has run more than 50 ad campaigns on Twitter, including during the World Cup. Coke was a sponsor and paid to promote the trending topic WC2010. Coke also showed messages whenever someone searched for words like “soccer” and “vuvuzela” with links that directed fans to Coke’s YouTube page.
Twitter ads are a work in progress, Mr. Donnelly said. Coca-Cola learned early on, for example, that dense Twitter messages about particular plays in a soccer game were clicked on or forwarded fewer times than short, simple ones about the World Cup in general.
Other advertising executives say clients are still wary. Twitter has already proved to be an effective free marketing tool, so why pay for an account?
“Every one of our clients has Twitter as a part of their social media strategy, but at the moment we’re not seeing a tremendous amount of interest in the specific packages that Twitter is offering,” said Aaron Shapiro, a partner at Huge, the digital agency within the Interpublic Group.
JetBlue advertises on Twitter, but Morgan Johnston, JetBlue’s manager of corporate communications who operates the airline’s Twitter account, said its “primary use of Twitter is really centered on maintaining a dialogue with customers,” which happens in the free account.
There is a long line of companies that want to advertise, Mr. Costolo said, but as with so many things at Twitter, where popularity with users has outpaced the company’s growth, it cannot yet handle the demand.
In August, Twitter hired Adam Bain, former president of the Fox Audience Network, an advertising unit of the News Corporation, as president for global revenue, and has plucked sales executives from Google, Facebook and Yelp to run sales across the country.
“We’re at this new inflection point, and it’s time to move forward a lot faster,” Mr. Costolo said.
This article has been revised to reflect the following correction:
Correction: October 11, 2010
An earlier version of this article incorrectly described the Publicis Groupe, rather than its subsidiary VivaKi Nerve Center, as a digital agency.