Startups

Twitter Turns Up Heat On Ambitions

Tim Bradshaw,

9 Jan, 2012

The arrival last week of media mogul Rupert Murdoch on Twitter was a symbolic moment for the five-year-old company. The quickfire nature of its 140-character updates has already won over many reporters. After overhauling the design and features of its homepage and mobile apps, Twitter is now gently turning up the heat on its ambitions as an advertising business.

"Twitter is more of a journalistic than a marketing phenomenon," says Mark Read, chief executive of WPP Digital, the advertising group. "If you talk to newspaper editors and people in the media, they are obsessed."

By contrast, Twitter is "still trying to figure out" its advertising products, Mr Read says.

Marketers spent an estimated $100m-$150m on Twitter advertising to reach its 100m users last year, compared with forecasts of nearly $4bn for Facebook and its 800m users.

"For the right category of marketers â€“ those that involve entertainment properties, personalities, launches and news, those that have their own content or sponsor events â€“ it's pretty relevant," Mr Read says. "But it requires a greater degree of sophistication than other forms of online advertising. It's harder to evaluate its impact."

So far, Twitter's advertisers have been prepared to pay $1 to $4 for each new follower through "promoted accounts", though some â€“ such as carmakers â€“ are bidding more than $10. "Promoted tweets", which make brands' marketing messages more likely to be seen by more users, are charged based on "engagement", such as the number of replies or "retweets".

That commercial model is hard to fit into a typical online media-buying plan which tends to revolve around clicks and impressions, says Simon Mansell, chief executive of TBG Digital, a social marketing specialist. "It's not really simple for an ad buyer to make a purchase."

Twitter needs to grow its revenues rapidly to meet the expectations of its investors who have valued the privately-held company at $8bn.

Adam Bain, Twitter's head of revenue, says: "Twitter the product is five years old, [but] Twitter the business is just slightly over a year old. We've done a lot in a short amount of time . . . Our motto has been to do it right, rather than do it right away."

Only a "handful" of people worked in Twitter's advertising department when he arrived in September 2010, but now more than 100 are employed in cities such as London and Tokyo, and it is hiring fast.

The slow rollout of ads has helped to keep engagement rates much higher than other online formats â€“ low-single-digit percentages of people seeing a sponsored tweet interact with it, compared with a fraction of 1 per cent for Facebook or standard display ads.

"The engagement rate on ads is probably the highest I've ever seen on any digital advertising that I've run in the last 10 years," says Mr Mansell at TBG Digital.

Last month, Twitter began allowing some existing advertisers to use a self-service portal to buy ads. That move in itself was significant because Twitter's first forays into advertising were with only a handful of carefully selected big brands, such as Starbucks and Paramount Pictures.

Today, Twitter has run campaigns from a total of 3,000 brands, with Nike recently launching a new branded @Nike account. Twitter has commitments from some large brands to spend $2m in 2012, according to one source.

In recent weeks, "handpicked" smaller advertisers have been brought on board, as long as they know the right people and can meet the $15,000 per month minimum spend.

"I got an intro to one of their account managers, over Twitter appropriately enough," says Damien Tanner, co-founder of Pusher, a real time messaging start-up. "I got the account up and running within a day. I only had to send them a few details. I was very impressed."

While Mr Tanner says his campaigns have been successful in attracting new followers, the overall return on that investment is not obvious. "I don't have enough data to work out how much I can pay for a follower."

Mr Bain at Twitter said that advertisers "keep coming back for more" after starting to use its ads, but he adds: "Often they need help with ideas, they need help with best practices."

Other advertisers contacted by the Financial Times, who did not wish to speak publicly, gave Twitter and its products mixed reviews, raving about high response rates but describing the advertising system as "limited" and the company as "confusing to work with".

"We were struggling at first with Promoted Tweets but what we discovered is you have to got to be very timely and very current," says Paul Smith, managing director of Techlightenment, a social marketing agency.

Buying ads around phrases linked into live "event TV" such as X Factor or sports games was most successful, he says.

"The level of activity and interest on the part of our followers is greater than any other channel," says Anita Newton, vice-president of retail and digital marketing at AMC Theatres, a cinema owner.

For some ad industry veterans, abandoning traditional click-based metrics is no bad thing.

"Twitter has the opportunity to disrupt the media business with meaningful new formats, rather trying to retrofit the old ad model," says Ajaz Ahmed, chairman of AKQA, a large digital agency. "The combination of scale, immediacy and real-time analytics provides an ideal platform for monetisation."

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