San Francisco - Twitter Inc. on Thursday formally launched a service to allow small businesses to buy and place ads on the online messaging platform.
Twitter, which for years has sought ways to expand its advertising revenue, hopes the new ad service will at least partially answer looming questions about its long-term business strategy.
Twitter CEO Dick Costolo told CNBC's Julia Boorstein that "[small business owners] have been banging down our door for the last two years, wondering when we would provide them access to our ad products. Based on tests, they are thrilled with the results."
Since 2010, Twitter's in-house sales staff has sold "promoted tweets" to large businesses on a case-by-case basis. The company spent last year developing a self-serve system that could handle a far greater volume of ad transactions and, in November, opened the system to a small number of clients for testing.
"It's a simple next step to go to [small business owners] and say, 'here's an opportunity to amplify what you are already doing."
Officially launched on Twitter's website on Thursday, the new service is limited to merchants and advertisers who use American Express cards. Twitter will open the service to other cardholders in the coming months.
"Small businesses will log into Twitter, then Twitter will promote tweets and accounts," Boorstein told Squawk Box. "Advertisers only pay for performance. [Twitter] charges when they gain followers or people are engaged with their tweets."
The rollout comes at a critical phase in the company's development and will be closely observed by investors and analysts curious to see if the company will go public anytime soon.
Founded in 2007, the San Francisco-based company lets people send 140-character messages, or tweets, to groups of followers. The company has more than 100 million active users and a valuation topping $8 billion, even though it has not yet established a money-making model.
Co-founder Jack Dorsey said in January that Twitter's "business model has been in development for some time and it works."