SAN FRANCISCO -- In a major step in building up its advertising business, Twitter will begin showing ads to users based on their Web browsing history, the company said Thursday.
Twitter is following the example of Facebook, Google, Amazon and other companies which have profited handsomely from the controversial but effective form of ad targeting.
Ads sold this way are still a relatively small percentage of the overall U.S. online advertising market, but demand is increasing. Twitter said in July it would begin testing retargeting.
“Retargeting is one of the most precise ad targeting methods. People are far more likely to buy something that they were already in the market for,” said Larry Kim, founder of WordStream. “It’s the low-hanging fruit for advertisers to go after.”
Tracking people on the Web has become a source of growing controversy. Twitter’s use of retargeting is just another red flag for the erosion of privacy on the Internet, privacy watchdogs say.
“Twitter users should be worried that the company will be gathering and selling more of their personal information,” said Jeffrey Chester, executive director of the Center for Digital Democracy. “Twitter went public without any clear path to profitability unless it expands its data-driven advertising for brands.”
Twitter said it would disable the feature for users who check the “Do Not Track” option in their browsers. Twitter users can also choose not to receive “promoted content” by tweaking their privacy settings on the service.
Twitter also announced its first female board member Thursday, Marjorie Scardino, former chief executive of Pearson. Still, Wall Street analysts are not head over heels for Twitter shares at the moment. Twitter, which soared 73% on its first day of trading, isn’t expected to fly higher in the next year. Its trading price after a couple of days of gains -- $45.75 in midday trading -- already has high expectations priced into it, analysts say.
"We see considerable competition, operational risks, and an excessively valued stock, and view the past two days of gains as enhanced selling opportunity," said Scott Kessler, equity analyst with S&P Capital IQ.
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