Twitter Inc.'s foray into advertising is receiving mixed reviews among marketers, underscoring the challenges of turning the popular micro-blogging service into a highly profitable enterprise. The popularity of Twitter has fueled expectations that marketers could use the service to target relevant ads to consumers interested in real-time information about breaking events and other topics. Since launching its much-anticipated advertising products in April, Twitter has signed on more than 30 big-name brands, including Coca-Cola Co., Virgin America and Starbucks Corp., to test them. Some marketers say that early results are promising but that advertising on Twitter remains an experiment. Other marketers, including PepsiCo Inc.'s beverage brands and Best Buy Co., who tested out Twitter's new advertising products—some without cost—haven't made new ad buys. Marketers say they definitely aren't ruling out advertising on Twitter in the future, but that it's still early days and they are figuring out what works.
"The jury is out" on whether Twitter can become a home for brand advertisers, said David Cohen, an executive vice president at Universal McCann, a media-buying agency owned by Interpublic Group of Cos. Twitter offers "Promoted Tweets," where marketers pay to have their messages listed as the first result when a user conducts a search on Twitter.com; the site handled about 130 million searches in August, according to comScore Inc. The company soon will experiment with ads that target users based on the content in their tweets, or messages. Marketers who tried out Twitter's new advertising product at launch didn't pay for the initial tests, according to two digital-ad executives. Now, Twitter is selling Promoted Tweets for upwards of $100,000. Marketers say they want more targeting options and better metrics to track the impact of their ad campaigns.
They also question whether consumers pay attention to paid ads on social-networking-type sites, however. Some see more benefit in using the sites' free options, such as creating Twitter accounts and interacting with users. "It is a totally new and different kind of ad format. There is a lot we still have to learn and think about," says Shiv Singh, head of digital for PepsiCo Beverages, which tested Twitter's ads this summer but has yet to make any further Twitter buys. For Twitter, a four-year-old service, much is riding on its efforts to woo Madison Avenue in its first serious attempt to generate revenue. The San Francisco start-up was valued at about $1 billion during a recent financing, according to people familiar with the matter. Twitter executives say their ad push has just begun and they are under no pressure to show revenue growth anytime soon, so long as users continue to flock to the service. Twitter executives say the ad products have exceeded expectations. Chief Operating Officer Dick Costolo said that on average 5% of Twitter users who saw a Promoted Tweet interacted with it, a rate that is "an order of magnitude greater" than most online ad campaigns.
Nearly 80% of the companies who tried Twitter's Promoted Tweets or a similar ad product known as Promoted Trends made a second buy, a Twitter spokesman said. When a Twitter campaign is a hit with users, it has the ability to make a big impact as people share the message with their friends, some marketers say. Airline Virgin America promoted the launch of its new service to Toronto in April by offering special discounts to Twitter users. The promotion drove the airline's fifth-highest sales day to date, says Jill Fletcher, Virgin America's social-media communications manager. In recent weeks, Twitter began rolling out a redesign of its website designed to give advertisers a better platform to showcase photos or videos, said Evan Williams, Twitter's chief executive. Each day Twitter users post more than 90 million messages, called tweets, nearly triple the number posted per day in January. About 375,000 new users are signing up every day, and there are now more than 160 million registered users around the world. As part of its efforts to woo marketers in New York, Chicago and elsewhere, Twitter in recent months hired experienced advertising executives from Google Inc. and Facebook Inc., among other companies. Ad spending on social networking-type services remains a small fraction of the total online ad market. Marketers this year are expected to spend about $1.7 billion on social networks—just 6.7% of the total $25.1 billion market, according to research firm eMarketer Inc.
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