IT was a tweet like many others from Starbucks, promising free refills to customers who brought in reusable tumblers on Earth Day.

But the message came to users in a different way - it appeared at the top of Twitter search results pages, even for those who weren't among the coffee giant's followers. And there was a tiny tag in the corner of the update, outlined in yellow and reading "Promoted by Starbucks Coffee."

The ubiquitous Seattle-based chain is one of the first guinea pigs in an effort by Twitter to generate revenue from the micro-blogging service.

The new ad system was unveiled last month with five participating companies, including Best Buy electronics stores, the Red Bull soft drink company, Sony Pictures, Starbucks, airline Virgin America and the Bravo TV network.

Twitter Chief Operating Officer Dick Costolo recently told Reuters that the San Francisco-based company hopes to add hundreds of new "Promoted Tweet" partners into the mix by the fourth quarter of 2010.

The company's value was put at US$1 billion last year. But Twitter has yet to generate a profit. Wharton experts say finding a successful model for the Promoted Tweet is only one of the challenges the company must overcome to avoid the fate of former "next big things" like Netscape, Excite or Pets.com.

How can it help businesses create a level of engagement with consumers that turns the service - which allows users to communicate in bites of 140 characters or fewer - into a useful tool for marketing and customer service?

For the first quarter of 2010, the company reported that more than 4 billion tweets were sent using the service. "The real challenge, though, is how Twitter is going to monetize this," says Eric Bradlow, a Wharton marketing professor.

"Maybe they can start charging for longer tweets or start putting in a two-tier pricing model for businesses. Maybe they can have some charge after a certain number of tweets or they can have advertising somewhere on the Twitter page or in tweets themselves."

The Promoted Tweet is just that - an advertising message that appears on the top of the results screen in response to a user's search.

In Starbucks' case, for example, anyone looking for updates containing the word "coffee" might see Promoted Tweets from the company.

Companies pay Twitter to run the ads, which look and function like any other tweet (for example, users can send reply comments) except for a "promoted by" tag in one corner. Twitter executives have been careful to say the Promoted Tweets model is only in the experimental phase.

"Promoted Tweets are a bad idea," says Wharton marketing professor Peter Fader. "It's one thing to have a relatively unobtrusive display ad above or next to a set of search results on a monitor, but this will really ruin the user experience on Twitter."

Fader thinks Twitter ought to start looking for a different route to financial success: "The right business model for Twitter is to be bought by another company and have the user experience folded into a broader array of media services. I see little advantage to Twitter as a stand-alone entity."

But Kartik Hosanagar, Wharton professor of operations and information management, believes patience is the best policy for those dismissing Twitter right now. "Promoted Tweets are the first major monetization initiative Twitter has announced," Hosanagar notes.

"Just as Google is successful with search ads because it is exceedingly good at matching results with user intentions, Twitter will need to be effective at providing Promoted Tweets that users find useful. They need and intend to do much more than just match keywords."

Frivolity

Still, Fader warns that Twitter suffers from the very frivolity that generates a lot of the service's publicity.

The biggest buzz from the site comes from the mini-scandals and sound bites that arise from its use by celebrities - and that might make it more difficult for businesses and consumers to take the service seriously as an entrepreneurial tool.

"That people were tuning into CNN to see how many followers Ashton Kutcher got, (garnered) Twitter a whole lot of publicity, but in the long run probably didn't do it any good," Fader says.

"It is a shame that it is saddled with this cutesy name and a bird for a logo and the race between Aston and Britney Spears for millions of followers. It would almost be better to split off the entertainment aspect into a different service (because Twitter) really does have an opportunity to have real business and consumer uses."

But Vivek Wahdwa, the director of research at Duke University's Center for Entrepreneurship and Research Commercialization, says the more light-hearted aspects of Twitter don't count it out of the business realm, especially in the area of Promoted Tweets.

"I found there are two types of Twitter users: those who tweet every time they go to the bathroom, and those who have intelligent things to say," notes Wahdwa. "You can judge by the tweets of both groups what their general interests are - like Google does with Web searches - and target messages to them. I can see (Promoted Tweets) as an opportunity for Twitter (the way that) search ads are for Google."

And Twitter has put some effort into showing businesses how the site can work for them. The company created a page on its Website to offer suggestions for "tweet-based" marketing and customer service campaigns.

Twitter feed

For example, an employee of the New York-based ice cream chain Tasti D-Lite uses the company's Twitter feed to answer customer questions and take suggestions. In another example, the Dell computer store posts coupons and special offers for electronics that are exclusive to Twitter.

Dell and Tasti D-Lite are examples of businesses that found a way to engage customers using Twitter. But experts question if companies will ever be able to reach broader audiences that way - and if the answer is no, how can Twitter keep itself on the "must" list for investment in social media and Internet marketing?

The Edison Research/Arbitron survey found that the majority of Twitter users are "lurkers," or those who follow various people, but don't take part in conversations on the service or contribute a significant amount of original tweets.

"Twitter appears to be functioning as more of a broadcast medium (as) compared to Facebook and many other social networking sites and services," according to the report.

Because of that, Twitter users might be more susceptible to sales pitches.

Ultimately, then, says Wharton legal studies and business ethics professor Andrea M. Matwyshyn, Twitter's penetration and success in its business applications will be whether those "lurkers" become really interested customers for the businesses who seek them.

(Reproduced with permission from Knowledge@Wharton, http://knowledgeatwharton.com.cn. All rights reserved. Shanghai Daily condensed the article.)