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Twitter to Pursue Smaller Ad Clients

“The next phase in our relationship with [Twitter] is how … to be a big volume for new customers.”

NEW YORK Twitter Inc. will begin marketing its ads to small and medium-size merchants, casting a wider net for advertising revenue as it steps up its efforts to turn more than 100 million monthly Twitter users into a business big enough to justify its heady valuation.

Twitter will begin casting a wider net for advertising revenue as it steps up its efforts to turn more than 100 million monthly Twitter users into a business big enough to justify its heady valuation, Shira Ovide reports on digits. Photo: Getty Images.

Since Twitter began selling ads nearly two years ago, more than 3,000 mostly large companies, including Wendy’s Co., WEN +1.37% Volkswagen AG VOW.XE 0.00% and Southwest Airlines Co., LUV -1.31% have paid to have their Twitter messages, or “tweets,” posted prominently to people surfing Twitter.com.

The San Francisco start-up plans to unveil Friday a long-promised system to let smaller companies sign up online to buy “promoted,” or paid, tweets. Until now, advertisers or ad agencies had to go through a Twitter representative, which limited access to ads. Twitter has said that selling ads to small businesses is one leg of its growth plan.

The ad-expansion plan comes as Twitter works to live up to a valuation of more than $8.4 billion, based on recent private investments. Despite that lofty sum, Twitter remains behind Internet companies such as Facebook Inc. and LinkedIn Corp. LNKD -0.76% in generating revenue.

Twitter won’t disclose its advertising revenue, but research firm eMarketer Inc. estimates Twitter sold about $139.5 million in ads last year. Facebook’s recent filing for its initial public offering showed it had $3.15 billion of ad revenue for 2011.

While many of its peers have launched multibillion-dollar IPOs, Twitter Chief Executive Dick Costolo has urged its employees to be patient about going public. “I don’t worry about the way anyone else runs their business,” Mr. Costolo said in an interview Thursday.

Some companies praise Twitter for moving slowly with ad sales to avoid disappointing advertisers and Twitter fans. So far, Twitter has worked closely with many companies to help craft marketing messages, but its smaller ad clients won’t enjoy that kind of direct help.

“Until we see more of a natural state of things where Twitter isn’t so actively involved, it’s hard to tell how successful Twitter advertising is going to be,” said Debra Aho Williamson, principal analyst with eMarketer.

As Twitter opens its ad system to smaller advertisers, it said the first batch invited will be U.S. merchants that hold or accept American Express Co. AXP +0.49% credit cards. Twitter said that later this year it will allow any company to buy Twitter ads. The alliance with American Express gives Twitter a pre-screened pool of small businesses to work with initially.

As with other promoted tweets, companies will pay Twitter only when people click on an ad message, reply to it or circulate it to other Twitter followers.

For its ad expansion to succeed, Twitter needs to increase its ranks of users to better please companies such as Bonobos Inc., an online seller of men’s clothes and one of the few smaller businesses it has allowed to buy ads.

Richard Mumby, the company’s vice president of marketing, said Bonobos sought permission to start buying Twitter ads last year, including to pitch a new line of suits and a holiday sale. He said a high percentage of people bought Bonobos products after clicking on the Twitter ads, but he would like to see Twitter bring in more potential clothes buyers.

“Twitter has good promise,” Mr. Mumby said. “The next phase in our relationship with them is how to crack that nut on how to be a big volume for new customers.”

Link: http://online.wsj.com/article/SB10001424052970204059804577227541339787780.html