Twitter is looking to Facebook for new advertising models. Will CEO Dick Costolo be successful?

 

In the competition with Facebook, Twitter is trying to land more small businesses as advertisers. To this end, the company is changing its fee model for advertisements.

Until now, Twitter has received money when a user responds to ads that look like tweets and appear in the normal news feed - by replying, retweeting or by simply clicking on them.

Soon, advertisers will be able to specify exactly what they spend their money on. For example, a retailer could pay Twitter only when a user clicks through to its website to view its fall collection. Another customer may only pay if they gain new followers, their app is downloaded, or they receive a user's email address.

The new fee model is similar to that of other social networks and online advertising platforms. For example, Facebook customers can choose to pay for clicks, likes, or app installs.

With the innovation, it will be more difficult for Twitter to generate revenue with advertising. It's not enough for users to favor something. You already have to go one step further. This is a risk for a company that generates most of its revenue from advertising. Revenue more than doubled to $312.2 million in the second quarter after expanding mobile advertising capabilities.

But the wider selection should help Twitter attract more small and midsize businesses as customers. They have limited resources and often not as much time to manage social media campaigns. That's why they're counting on Twitter, Facebook & Co to take more care of their potential customers.

 

Advertising prices are likely to rise

The new structure is likely to lead to rising ad prices as the battle for certain user groups intensifies. But if the strategy works, advertisers could benefit overall because they get more for their ads.

"As an advertiser, there's value in being able to pay specifically based on performance," says Craig Elbert, marketing manager at menswear company Bonobos. "It's an attractive opportunity when you can measure exactly what you're getting."

Bonobos has been running ads on Twitter for more than a year - and the campaigns keep getting better, the company finds. "[Twitter] has introduced many new products. Many of them - like this one - copy what works on the Facebook ad platform," Elbert says. "I think changes like this show that Twitter is responding to feedback from advertisers."

The new advertising module could make it easier for Twitter to attract new customers or those with little time or resources, others say. "It makes ad placement faster, helps clients focus on their business goals and improves measurement," says Jason Stein of social media agency Laundry Service.

According to its own data, 4.5 million small businesses are active on Twitter, and thousands of them have placed ads there. By comparison, more than 30 million small businesses have accounts on Facebook and more than 1.5 million advertise on the social network.

The new ad types on Twitter will initially be tested by small and medium-sized companies and certain partners, the company said. Larger customers are then to be added in the coming months.

 

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Source: The Wallstreet Journal Online