Twitter's Self- Serve Ads Solve a Big Problem, But Create A New One

By Erin Griffith , written on February 17, 2012

From The News Desk

This morning Twitter unveiled a product it's been hinting at for months--a self-serve ad platform to rival the self-serve offerings of competitors like Facebook.

The dashboard product solves a mounting problem for Twitter, which is pricing. The company's ad products have now been in market for a few years, but they've not been available to the whole market. With each product roll-out, Twitter has very carefully selected top tier brands as its launch partners. Promoted Tweets featured brands like Pepsi and Sephora. Promoted Accounts featured Xbox. Promoted Trends featured Disney/Pixar. The offerings have opened to more advertisers--3000 to be exact--but not all price points.

Although Twitter won't confirm it, the entry level buy for a Promoted Product on Twitter is between $10,000 and $15,000 for three months of promotion. On Promoted Accounts, the company charged a minimum cost per follower of 50 cents and Promoted Tweets charged 10 cents per engagement (click throughs, favorites, retweets and @replies). That's simply too much for most small and mid-sized companies, and certainly too big for local businesses with nearly insignificant ad budgets.

Part of the reason Twitter ads have been so expensive is because the it costs a lot to employ a sales force dedicated to getting advertisers up and running on the platform. It simply isn't worth it for a limited sales staff to piddle around with small, $100 buys. Compare Twitter's 3000 advertisers with, say, Facebook's 150,000 to 200,000 or Google's million-plus.

Facebook's self-serve platform has been around for a couple of years, and you can launch a campaign for something like $20. You don't need to be a qualified advertiser; I just made a joke ad targeted to one of my friends for that exact price.

All of this is not to say Twitter's ad product aren't effective and worth the high price of entry. I will not argue with the 52% engagement Volkswagen had on its Beetle relaunch, for example. Obviously that's an outlier; Twitter tells advertisers to expect an engagement rate of 1% to 3%.  The click through rates on Twitter's ads is .3%, something Facebook cannot say for its click through rates, which are actually lower than the industry average for display ads, an already-pathetic .1%.

Despite the potential for a big backlash, Twitter's ads have performed to expectations, according to several large advertisers and agencies I spoke with. McDonald's may have crashed and burned with its #McDStories promoted trend--most people used the hashtag to mock the chain--but it also had the number four most retweeted message of all time thanks to a tweet combining #McLobster, #McWinning and #McSushi. Eighty percent of Twitter's advertisers are repeat buyers. Done correctly, it works.

So it makes sense that I've heard complaints from a number of small advertisers who want to benefit from the engagement and follower boosts offered Twitter's products. They felt Twitter excluded a giant chunk of its potential ad market with that expensive pricing structure. In fact, I was working on a story to that effect this week when Twitter came along and scooped me by launching a product that addresses the problem.

The self-serve ad platform--due to officially launch in March--means Twitter can now collect revenue as crazy-fast as it wants without being held back by the constraints of its sales force. It also means Twitter's Promoted Products will now be available to the full spectrum of advertisers.

Therein lies the problem.

If Twitter ads are open to all, won't they deteriorate in quality and start looking like Facebook ads? Which is to say, people will ignore them, or even worse, hate them. The last thing I want is an offer for teeth whitening, or for a discounted masters degree in nursing in my Twitter feed (I get those on Facebook, not that I'd have noticed if not for this story). Twitter's engagement rates are high because people actually notice promoted content; it's integrated seamlessly and, most importantly, unobtrusively, into the Twitter experience. And with the exception of McDonalds' #bashtag, they've come from brands that know what they're doing.

The company is taking similar proactive measures to offset the spam and low-quality crap its self-serve platform will almost certainly welcome. The most notable move was Twitter's recent acquisition a web security company called Dasient. The deal was partly a talent buy, but I'm told Dasient's ad network protection technology will play a big role in weeding spam out of Twitter's self-serve ad platform.

And when the product officially launches in March, the first group of advertisers will be highly qualified. Twitter is using American Express to vet its initial batch of 10,000 advertisers. They will be Amex cardmember or merchants. In exchange Amex will give them $100 in ad credits.

"(Senior management) would only move ahead if they felt it wasn't going to injure their relationship with community, said Jordan Bitterman, SVP/Social Marketing Practice Lead at Digitas. "I say that because as an advertiser, there've been times where I've wanted them to do things quickly and it hasn't happened because they're so focused on user experience."

And still, the user experience focus, or the new anti-malware technology, or the  Amex deal won't totally ward off offers for free glamour shots and $4.95 stock trades (plus a free smartphone! sounds totally legit and awesome, right?), but it's a start. Facebook wouldn't have gotten to $3.7 billion in revenue without taking money from advertisers like Zecco Trading. Last year Twitter earned an estimated $139.5 million in revenue, according to eMarketer. This platform will accelerate the path to profits.

Image via kopp0041 on Flickr.