Promoted Tweets New Twitter Business Model

Twitter will be placing ads called "promoted tweets" on the network on Tuesday of this week. First the ads will show up in search results and later in users' Twitter feeds on Twitter.com as well as within thirdparty clients such as Tweetdeck and Twitterberry.

Twitter's first advertisers are Starbucks, Bravo and Virgin America - all users already heavily engaged in Twitter along with other social media sites. Twitter COO Dick Costolo has stated that Twitter is not in a rush to profit. According to him the goal is to roll the business model out slowly to see how users react to the ads.

To start advertisers will bid on keywords on a cost-per-thousand basis although Twitter is developing a model called "resonance" that may alter the pricing structure based on impact (how much a tweet is retweeted, marked as a favorite and how much a user clicks through to a link). Ads that outperform typical tweets with a lift in resonance will stay on the network while those that do not outperform typical tweets will fall out. This ad program differs from Google and other SEM platforms because Twitter will only display one ad at a time.

Watch for the promotional tweets this week and stay tuned for more updates on how the ad program develops and performs.