The startup is trying to make money without alienating the tens of millions of people who have gotten used to tweeting and following friends, celebrities and others without commercial interruptions. Just as it has through most of its four-year existence, Twitter is treading cautiously.
The new ads, called “promoted tweets,” will pop up only on searches at Twitters Web site, and the messages will be limited to a small group of test marketers including Virgin America, Best Buy Co., Sony Pictures and Starbucks Corp. Fewer than 10 percent of Twitters users were expected to see the ads Tuesday, but the messages should start appearing on all relevant searches within the next few days.
One promoted tweet from Starbucks was getting retweeted heavily, thanks to its free tax-day offer: “On 4/15 bring in a reusable tumbler and well fill it with brewed coffee for free. Lets all switch from paper cups.”
The move heralds a turning point for Twitter, which has held off on selling ads even as its widening audience turned it into an obvious marketing magnet and investors poured $155 million into the San Francisco company.
The last cash infusion seven months ago valued privately held Twitter at about $1 billion, even though its only significant revenue had come from giving Google Inc. and Microsoft Corp. better access to its service. The technology powerhouses paid Twitter an undisclosed amount for that right.
Twitters seemingly ambivalent attitude about making money reminded some Silicon Valley observers of the profitless Internet startups that wooed investors during the dot-com boom of the late 1990s, only to crash and burn at the turn of 21st century.
Twitter co-founder Biz Stone defended the companys “slow and thoughtful approach to monetization” in a blog announcing promoted tweets, even as he recalled a joke Comedy Centrals Stephen Colbert made at his expense during an interview last year: “So, I assume that Biz in Biz Stone does not stand for Business Model.”
The new advertising system should give a better inkling about whether Twitter will be more like Google or Pets.com, whose most valuable asset turned out to be a sock puppet.
Google itself took several years after its 1998 inception before it began selling short ads next to its search results, spawning one of the worlds biggest marketing vehicles with ad revenue of nearly $23 billion last year.
Twitter already is parroting Google in some respects. Thats not surprising given that Stone and a fellow co-founder, Twitter CEO Evan Williams, briefly worked at Google, as did Twitters chief operating officer, Dick Costolo.
Theres a twist to the way Twitter is using its search engine as an advertising springboard. Instead of displaying commercial messages on the margins of the search results, as Google does, Twitter will blend them with the rest of the tweets and label them as promotions.
The ads will be confined to Twitters standard 140-character limit so they can be passed along, or “retweeted,” to other users. Twitter plans to pull promoted tweets that arent attracting attention.
“You want to create something that interests people rather than just screams at them,” Bernoff said.
Michael Wilson, a Brigham Young University student who lives in Salt Lake City, is worried Twitters advertisers eventually will dominate the service.
“I think its going to be harder and harder to have your voice heard,” he said.
Many companies already use their own Twitter accounts to connect with customers and offer discounts to people who follow them.
What remains to be seen is whether Twitters new advertising system will prove effective enough to persuade companies to pay for a featured spot in the search results instead of just trying to reach people through the free communications channel.