SAN FRANCISCO (Reuters) - Twitter, the rapidly expanding microblogging service, plans to have hundreds of advertisers using its new ad system in the fourth quarter as the company ramps up plans to become a self-sustaining, profitable business.
Chief Operating Officer Dick Costolo said the company’s newly-launched advertising system would provide a key pillar in Twitter’s plans to turns its popular service into a significant money-making operation that can justify its rich valuation.
“We were valued at over a billion dollars last September, so we’re going to live in a world where we need to be generating hundreds of millions of dollars in revenue,” Costolo told Reuters. “We’re thinking about big, big numbers.”
Costolo said he believed the company will eventually become profitable. But he declined to provide a timeframe for achieving profitability, which the company is currently hoping to generate from its advertising system and a forthcoming commercial accounts business, due to launch in July or August.
“We are absolutely not modeling out we need to be at over a hundred million by this date, and over a billion by this date and over 10 billion by this date,” he said.
The company is currently in the process of adding roughly another dozen advertisers to its so-called “Promoted Tweets” program which it unveiled with five participating advertisers last month, Costolo said. By the fourth quarter, Costolo expects hundreds of advertisers.
“We really look to start to ramp this up aggressively in Q3 and then really blow it open in Q4,” Costolo said.
Twitter, which allows its 100 million users to send 140-character text messages, or Tweets, to groups of so-called followers, is one of the Web’s most popular social networking services, along with Facebook and LinkedIn.
The service is increasingly challenging established Web giants such as Yahoo Inc and Google Inc for consumers’ online time. In January, Google released a social messaging service called Google Buzz that mimics many of Twitter’s features.
And on Tuesday, Facebook introduced a stripped-down version of its site, dubbed 0.facebook.com, designed to let cell phones quickly send Facebook messages without incurring wireless data charges.
Costolo, a co-founder of the FeedBurner business that Google acquired in 2007, said the shifting competitive landscape was not among his key concerns.
“The things I don’t worry about are who’s going to knock us off the mountain,” he said.
Costolo joined Twitter as COO in September and oversees monetization efforts and day-to-day operations at the San Francisco-based company, which recently expanded its staff to more than 200 employees.
While the company is presently focusing on two revenue-generating plans, Costolo said that Twitter could decide to develop other, yet-undetermined business models in the future, depending on how the ads and commercial accounts perform.
So far, Costolo said the promoted tweets have been “successful beyond our wildest dreams.” But he noted that the limited pool of advertisers that Twitter is currently working with makes it difficult to forecast how powerful of a money-making engine the Promoted Tweets could become.
Initial advertisers included airline Virgin America, coffee chain Starbucks, NBC Universal’s Bravo TV network, and Sony Pictures Entertainment, a unit of Sony Corp.
Costolo declined to provide financial details about the five current advertisers, including whether or not the advertisers were currently paying Twitter money for the ads or participating as part a test.
When Twitter expands the advertising system to hundreds of companies in the fourth quarter, Costolo said Twitter will be better able to forecast its revenue-generating potential for the next couple of years.
“I‘m super confident but it’s a dark tunnel and we’ll see where we are at the end of Q4,” Costolo said.
Reporting by Bill Rigby and Alexei Oreskovic; Editing by Gary Hill and Anshuman Daga