The Details Of Twitter’s Ad Model

Twitter COO Dick Costolo laid out the details of Twitter’s new ad platform at the company’s Chirp conference this afternoon. What we didn’t know before: Once the ad platform — which gives extra play to a Tweet of an advertiser’s choice — expands beyond Twitter’s own site, Twitter partners — like a third-party Twitter client — will be able to choose whether or not to distribute the “promoted Tweets” to their own users. If they do choose to participate, Twitter will split the resulting ad revenue 50-50.

(Twitter, by the way, refuses to call the messages ads, in part because users can re-Tweet and star them just like normal Tweets. Like our friends at SAI, however, we will not fall for their spin).

For now, the ads only show up when a user searches for a specific keyword. Ultimately, however, the ads will show up in a user’s stream and be targeted based on something Twitter is calling a user’s “public interest graph.” Costolo was vague — but said this could take into account where a user is located and also what accounts they follow.

Advertisers will eventually set maximum budgets for their Twitter campaigns, Costolo said. How much they end up spending, however, will be based on the ad’s “resonance” — a measure of how users engage with the Tweets. The frequency that the ads show up will also be based on this “resonance.” So, for instance, if two advertisers want their ads to show up when someone searches for a specific term on Twitter, the ad that shows up most frequently will be the one with the most “resonance” and if an ad doesn’t surpass a certain “resonance” score it will stop showing up.

Eventually, Twitter will have two primary sources of revenue: Advertising and paid commercial accounts. The commercial accounts, Costolo said, are already in beta testing with a “couple hundred companies.” No word on when they will roll out. Costolo said the company is “still working” on them.

As for when the ads will move beyond, Costolo would only say that it would happen before “next year.”