NEW YORK (AdAge.com) -- Even after six months, campaigns with nearly 40 different marketers and repeat customers such as Ford, Virgin America and Verizon, Twitter still views its ads as experimental.
But that's about to change. Twitter plans in November to take its ads beyond Twitter.com and extend them to the rest of the user base through apps such as TweetDeck and Hootsuite.
For all the campaigns so far, from Coca-Cola to AT&T and all the major film studios, the interaction rate with a promoted tweet -- defined as a retweet, a new follower or a click-through -- is 5%, significantly higher than a standard web display ad, where click-throughs are well below 1%.
"We now feel pretty confident we are cracking the code on a new kind of advertising, one that is more engaging ... but also more participatory," said Twitter Chief Operating Officer Dick Costolo.
The question going forward is whether Twitter's two existing ad units -- promoted trends and tweets -- can scale, and whether interest in Twitter remains concentrated among big brands that see it as a nifty, albeit small, promotional medium, or if, like Google search, it becomes a must-buy for all marketers.
More will be apparent as Twitter extends its ads to third-party apps, boosting reach for marketers and upping the number of searches that turn up its ads.
It can't come soon enough for Coke, which has run more than 50 campaigns on Twitter since June, and says its campaigns have had much higher interaction rates than Mr. Costolo is reporting.
Since June, Coke's follower count has grown from about 50,000 to 122,000. Nice, but hardly the kind of scale Coke needs. "My job is not to play around with tens of thousands of people; it's to play around with millions of people," said Michael Donnelly, Coke director-worldwide interactive marketing.
After watching engagement rates and experimenting with different pricing schemes, the company has rallied around the cost-per-engagement model, where advertisers bid on actions taking place on an ad, defined as a retweet, follow or click-through. Mr. Costolo said they're charging advertisers for only those occurring on the original ad.
Ultimately, Twitter's ads will travel wherever tweets go -- particularly third-party apps and search. This will bring a source of ad revenue into the ecosystem of Twitter-based apps, and increase the audience for the ads themselves. (So far the ads have only appeared in searches or on the home-page of Twitter.com itself.) A web-based self-serve tool is coming next year.
Twitter is still testing how its other unit, "promoted trends," will work in the app world. The promoted trend is Twitter's version of a home-page ad; they appear at the bottom of the list of organic top 10 trends and link to the search results for the keyword. Mr. Costolo said, in the first six months, a promoted trend increased the occurrence of a given topic or keyword anywhere from 300% to 600%, and that the effect lingers after the promotion ends. "It accelerates the pace of discussion," he said.
Twitter won't sell a promoted trend to just anyone; it must be a plausible organic trend, which is part of what made it a good match for the film studios. The NBA bought a trend for LeBron James around the time of his "Decision" to leave the Cavaliers ... with a link to a story about other NBA free agents. Twitter can only show one promoted trend at a time, but that will change when it starts targeting trends at certain geographies or even user interests. More types of units are on the way. An obvious one would be a "promoted accounts" unit to go along with "suggested users." Mr. Costolo said they're studying it, but still tweaking the algorithms on the suggested user feature.
How big will advertising be for Twitter? Part of the answer is how many searches actually occur on Twitter, and what people are searching for. Twitter won't divulge that number, but instead points to some fat box scores that imply search traffic is significant: 160 million accounts, and nearly 100 million tweets and 370,000 new sign-ups per day.