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Having launched a suite of advertising solutions over the past year, Twitter has answered one of the questions that had previously plagued it: will the popular social media hub ever find a business model?
But now that advertisers are using Twitter to promote themselves and their products to its audience, there's a new and even more important questions: is it delivering a return? According to some reports, the answer is in many cases a resounding 'no.'
As detailed by Lauren Dugan of MediaBistro's AllTwitter blog, two articles on Investors.com have called into question the efficacy of Twitter ads.
In one of the Investors.com articles, several digital marketers spoke out about Twitter as an ad platform, and they didn't express much enthusiasm. "It's more about image and branding," one said.
Another bluntly stated, "Our clients are very (return on investment)-focused. We're not that excited about Twitter as an ad network." The message: Twitter ads don't make any sense unless you're a big brand.
In the other Investors.com article, Craig Macdonald, the CMO of digital marketing services provider Covario revealed that one of his consumer electronics clients saw mediocre ("so-so") results from its Twitter ads:
It doesn't seem that great a deal for the advertiser. (Our client) is doing this for the experience, to be part of this cool new thing and so they can say they did it. But the business results are not there yet.
Another digital marketing firm, MoreVisibility, tells a similar story. Danielle Leitch, EVP of Client Strategy for MoreVisibility, told Investors.com that "the click-through rates were paltry" for its clients' Promoted Tweets.
Google and even Facebook (which is not known for knock-your-socks-off CTRs) were far more effective at generating ROI, she said.
So is Twitter's advertising-based business model destined to fail? Certainly, its prospects don't look great long-term.
While big brands can afford to spend money on ineffective Twitter campaigns and justify it based on the site's popularity, it won't be the 'hot new thing' forever.
If Twitter wants marketers to grow their ad spend, it will eventually have to deliver effective campaigns that can scale. Right now, there's reason to be skeptical about its ability to do this.
Ironically, the nature of Twitter is part of the reason. Currently, most of the 'advertising' taking place on the site isn't going through its ad offerings. With no payment, just about any company can use Twitter as a promotional tool. Many, of course, are doing just that.
While there is a very real cost associated with this, it seems that most companies, particularly smaller and mid-sized businesses, are more likely to expect a higher return from their own Twitter efforts than Twitter's paid ad solutions. If current advertiser experiences are any indication, they just might be right.