Twitter Is Testing A Mobile Ad Product That Will Give Facebook A Huge Headache

Twitter is testing a new ad product that promotes or recommends mobile apps, two sources tell Business Insider.

Twitter declined to comment.

The product will likely compete directly with Facebook's "mobile app install ads," which have been cited by Facebook COO Sheryl Sandberg as one of Facebook's more successful ad formats. Sources have repeatedly told us that return on investment for Facebook's mobile app ads far outstrips Facebook's regular ads. Facebook has at least 3,800 app advertisers.

Mobile app install ads simply recommend apps for Facebook users to download. They're widely used by mobile game companies and tech startups - companies whose entire business revolves around apps. On Facebook, mobile app install ads have also been of interest to e-commerce and online retail companies, because if you can persuade someone to download a mobile shopping or booking app then a company can potentially generate a high level of lifetime revenue from that customer.

Moreover, Facebook recently doubled down on mobile app ads by adding a new feature, mobile app engagement and conversion ads, which basically remind people who clicked on an app ad previously to check out the app again. Facebook would not have launched that product, presumably, if app downloads were not a priority.

Thus, we're told, Twitter regards mobile app ads as low-hanging fruit for ad sales. The logic goes like this: Facebook just reported that 49% of its revenue now comes from mobile. Of that, likely more than half probably comes from mobile app install ads, one source tells us. Mobile app install ads are therefore likely a huge revenue driver for Facebook.

Here's what this means for Twitter: As 60 percent of users access Twitter on mobile devices, Twitter could greatly increase its revenues if it could successfully persuade app developers and users that Twitter is a good place to hear about new apps from friends and followers.

Twitter has increased its exposure to mobile ads and apps of late with its $350 million acquisition of MoPub, a mobile ad exchange that, eventually, will allow advertisers to use Twitter's data to target ads at people using other mobile apps.