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Wednesday, April 14, 2010

Twitter Unveils Advert Tweets in Bid for Profits

Twitter users are to see advertising on the site for the first time, as the microblogging service unveils a much-anticipated plan to transform itself into a profitable business.

The four-year-old company will today announce a new service called Promoted Tweets, which will allow businesses to buy keywords. “Tweets” written by the company will then appear at the top of the page when a user has searched for that word, much like on Google.

The adverts, which will be limited to 140 characters like all messages on the site, will only show up in search results. This means users who do not search for something will not see them in their regular Twitter streams. Over time, they may appear in the stream of posts users see when they log on.

Twitter co-founder Biz Stone said: “It’s non-traditional, it’s easy, and it makes a ton of sense for Twitter.”

Starting today, Twitter will reveal the first adverts to around 10 per cent of users. They will include “tweets” from companies such as Starbucks, Virgin America and Best Buy, the electronics retailer.

The move comes a day ahead of Chirp, Twitter’s developers conference in San Francisco.

Although Twitter was recently valued at $1 billion (£650.8 million) and has around 45 million regular users, it made almost no revenue until it began selling real-time search results to Google in December. The promoted tweets system has the potential of creating profits for the company and its investors, who have pumped $160 million into the company over the past four years. The number of elite venture capitalists including Union Square Ventures, Institutional Ventures Partners, Benchmark Capital and Spark Capital have significant stakes in the firm.

In contrast, Facebook is predicted by some analysts to make around $1 billion in revenue this year.

Facebook has 400 million users and already has demographically targeted advertising, based on information from the user’s profile

In the past its founders have said they wanted to concentrate on growth and not alienate account holders. But in September, the site amended its terms of use which paved the way for advertising. It has also made deals with search engines such as Google and Microsoft’s Bing, thought to be worth millions a year, to include tweets in their “real time search” offerings. Twitter is also expected to announce “professional accounts”, which would give added features to paying users, which could be another potential source of revenue.

Twitter has been testing the new advertising system for months. Dependent on the system’s success, it hopes to build a model based on “resonance” — where an ad will stay in Twitter’s system as long as other users click on the link and pass it around the site. This way it hopes only relevant advertising will appear prominently.

Analysts welcomed the move, but warned that if the new advertising was implemented poorly, it would risk alienating users. The technology commentator John Battelle said: “Twitter’s new ad platform will mark the first time, ever, that users of the service will see a tweet from someone they have not explicitly decided to follow. And that marks an important departure for the young service. One that I think is both defensible, and, if done well, could be seminal to both Twitter and to its partners.”


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