(Fixed day of week in first paragraph)
* Twitter unveils 'Promoted Tweets'
* Starbucks, Best Buy among handful to initially run ads
* Advertisers to eventually bid for Twitter keywords
(Recasts, adds Twitter, analyst comments, San Francisco
By Alexei Oreskovic
SAN FRANCISCO, April 13 Microblogging service
Twitter introduced a new advertising program on Tuesday, in a
first step to prove that its popularity among web users can
translate into a self-sustaining business.
Known as "Promoted Tweets," the ad program represents a
much-anticipated move to address concerns about the revenue
generating potential at Twitter and marks a key milestone on
the road to an initial public offering, analysts said.
"Over the years, we've resisted introducing a traditional
Web advertising model because we wanted to optimize for value
before profit," wrote Twitter co-founder Biz Stone in a post on
the company's blog on Tuesday.
Twitter, which lets users send short, 140-character text
messages, or Tweets, to groups of "followers," is among the new
breed of popular Internet social networking services, along
with Facebook and LinkedIn.
The company struck deals to provide its stream of Tweets to
Google Inc (GOOG.O) and Microsoft Corp (MSFT.O) for inclusion
in their Web search results last year, but Tuesday's ad service
represents the first fruits of an effort to build a business
model around a recurring revenue stream.
Twitter said that it was currently testing Promoted Tweets
with a handful of advertisers including Starbucks Corp
(SBUX.O), Best Buy Co (BBY.N), Sony Corp's (6758.T) Sony
Pictures and Virgin America. Under the program, a Twitter
message, such as a promotional offer by Starbucks, will appear
at the top of search results on Twitter for keywords that
companies specifically purchase from Twitter.
As Twitter broadens the program to include more
advertisers, spokesman Sean Garret said, keywords on Twitter's
search engine will be opened to competitive bidding by
advertisers, similar to the way that Google's lucrative paid
search advertising program operates.
Twitter also said on its blog Tuesday that the company
planned to eventually serve Promoted Tweets ads beyond its
search feature, offering the ads directly within users' message
Josh Bernoff, a Forrester Research analyst, said Twitter
needs to roll out the ad program more aggressively to
advertisers if it hopes to turn its service into a money-making
tool that can generate hundreds of millions of dollars in
"A handful of advertisers is not going to get them where
they want to go," said Bernoff. "Scale is where the success
Twitter does not release information about its number of
users, but comScore said the site had 22.3 million unique
visitors in March in the United States, up roughly 140 percent
The ad program represents Twitter's latest move to evolve
from a hot start-up into a financially focused enterprise. The
company has filled out its management team with executives with
experience at Google and Walt Disney Co's (DIS.N) Pixar
Animation Studios over the past year.
Twitter's Garrett said that Twitter has no plans for an
initial public offering, though as one of the Internet's most
popular Web companies, analysts believe Twitter could
eventually make for an attractive IPO candidate.
Cowen and Company analyst Jim Friedland said Twitter needed
to first show investors that the new ad model can deliver
"Even if this ad opportunity is incredibly successful, it's
still going to be a while before they have the track record to
go public," said Friedland. He pointed to Google, which
unveiled its AdWords program several years before floating
shares to the public in 2004.
Twitter is backed by investors including Benchmark Capital,
Spark Capital and Union Square Ventures. In September, the
company raised $100 million in a funding round that valued the
company at $1 billion, according to a person familiar with the
"Twitter has great potential as a marketing and advertising
channel with opportunities to create viral buzz around a
product or service," said Eden Zoller, analyst at technology
research firm Ovum.
"The flip side of Twitter's immediacy is that if
advertising messages are not very carefully positioned users
can hit back at brands and in real time, and brands will have
little control over this."
(Additional reporting by Shrutika Verma in Bangalore and
Georgina Prodhan in London; Editing by Simon Jessop and Steve