Full Details on Twitter's New Ad Model

With the inauguration of its ad model, Twitter has made its first direct overture to the thousands of companies – big and small – that use it to converse with customers and build awareness.

The resulting ad product, “Promoted Tweets,” is both more and less than advertisers might have hoped. More, in that Twitter has promised targeted ads will eventually appear directly in users’ Twitter streams and on third party clients. And less, in that the program will begin modestly, showing up only in search results – where CEO Dick Costolo confessed Twitter’s volume of page impressions is tiny.

“It’s a very small piece of the overall traffic,” COO Dick Costolo said yesterday at the AdAge Digital Conference.

Additionally, Twitter is still vague on many of the platform’s crucial components – such as how pricing and targeting will work.

But in his comments Costolo unleashed enough details to set agency execs’ mouths watering – and in some cases scratching their heads – as they dashed off point-of-view statements to clients. Below is a summary of what’s known, and what’s not, about Twitter’s new ad platform:

Resonance Score: The key element in Twitter’s new monetization scheme is an ad ranking algorithm called a “Resonance Score.” Twitter will calculate the score for a given Promoted Tweet by analyzing all the ways people interact with it, including the number of clicks, retweets, @reply responses, and other factors. Those that do not score above a certain threshold will be removed from rotation, and advertisers will presumably not pay for them.

“The idea is to get away from single unit of measurement to specify how people engage with tweet,” said Costolo.

Resonance Score Transparency: During the Q&A following Costolo’s presentation, 360i online marketing strategist David Berkowitz asked whether resonance scores will be available for all of a company’s twitter activity. Costolo answered, “Initially we’re only measuring resonance for companies using Promoted Tweets. It remains to be seen whether we roll it out more broadly and measure it for everything.”

Reached by phone afterward, Berkowitz said, “If resonance takes that central a role advertisers are going to need a lot more information about whether they’re resonant today or not.”

Yet despite his desire for more transparency in resonance scores, Twitter’s approach is more decipherable than Google’s quality score. And he added, “Not every tweet needs to have high resonance.” Examples include thanking a customer for a kind word, or asking Twitter followers for help.

Price: At launch, Twitter is selling the ads on a CPM basis at undisclosed rates. Later, as Promoted Ads are rolled out more widely, it intends to shift to a ROI-driven model. Details about that price structure and how the advertiser interface will work remain unknown.

Geolocation and Small Biz: Asked by an audience member how location data will figure in Promoted Ads, Costolo said “significantly.” He said, “As the program becomes more sophisticated, you’ll see all kinds of expanded opportunities for small businesses, and significantly larger businesses too.”

Analytics: Ad data will be available to Twitter advertisers in real-time. In Twitter’s analytics dashboard, companies promoting their tweets will have access to reports on clicks, retweets, favorites, and replies in real time.

Earned media: In an effort to stop unethical marketers from trying to game the system or deplete competitors’ ad budgets, advertisers whose Promoted Tweets are retweeted will not be charged for that pass-along effect.

“If I see a Promoted Tweet and I retweet it to all my followers, that’s all free earned media,” said Costolo. “One reason is we don’t want to incent inauthentic behavior in the environment.”

Integration with Commercial Accounts: Twitter still intends to roll out commercial accounts, a feature it once pledged to release by the end of 2009. “Along with that account, people will be able to leverage promoted tweets to do things with their Twitter.com/companyname page,” Costolo said.

Roll Out Schedule: In phase one of the program, Promoted Tweets will appear only on Twitter search results pages. In phase two, they will be made available to developers and Twitter clients via the companies APIs. In phase three, ads will begin to appear in users’ customized timelines. The dates for phases two and three remain uncertain.

Launch partners: For the launch Twitter is working with a small number of advertisers, including Best Buy, Bravo, Red Bull, Sony Pictures, Starbucks, and Virgin America. Porter Gale, VP of marketing for Virgin America, appeared alongside Costolo yesterday to announce. She said the airline is using Promoted Ads exclusively for a period of one week to announce a new destination city.