Twitter's advertising revenue is growing
While investors continue to question Twitter’s potential as new users do not sign up quickly enough, healthy gains on the advertising front point to continued support from brands.
Twitter yesterday reported advertising revenue overall was up 125 percent for a total of $226 million with mobile accounting for 80 percent of the total. While Twitter’s number of average monthly active users totaled 255 million as of March 31, 2014 — up from 184 million in the previous quarter and up 25 percent year-over-year — the growth disappointed investors, who sent the social network’s shares on a downward spiral in late trading yesterday after the results were announced.
“Valuing networks on the number of users, from a marketing perspective, is imperfect as more users means more noise,” said Matt Witt, executive vice president and director of digital integration atTRIS3CT, Chicago. “Twitter’s challenge is with the algorithm given the limited information available regarding users.
“Marketers find it difficult to deliver high value targeted ads as a result,” he said. “Facebook in the other hand has a rich picture of 'Likes' and behaviors.
“User growth won't stall advertising growth as long as Twitter works on improving its algorithm, eliminating the noise and offering a better way to deliver targeted ads.”
Tailored audiences Twitter reported a 96 percent year-over-year increase in advertising revenue per thousand timeline views during the first quarter for a total of $1.44.
Mobile MAUs reached 198 million in the first quarter of 2014, an increase of 31 percent year-over-year and representing 78 percent of total MAUs.
Twitter also reported that timeline views reached 157 billion for the first quarter of 2014, an increase of 15 percent year-over-year.
Going forward, the social network expects a boost from the integration of the MoPub mobile ad exchange, which it acquired last year.
“Content creators, publishers and marketers care about two things: scale and engagement and our platform increasingly delivers both of those,” said Dick Costolo, CEO of Twitter, San Francisco, in a conference call with analysts to discuss the results.
“I am proud at the speed at which with which the teams here integrated MoPub, our mobile ad exchange, into Twitter,” he said. “It now reaches over one billion iOS and Android users, making it one of, if not the largest, in-app mobile ad exchange and the only one at scale to offer publishers native in-app advertising.
“Our recently announced mobile app ad download suite is the first product to take advantage of this integration, but there is a lot more to come.”
Despite these gains, marketers are concerned about the social network’s lack of user data and the challenges this presents in targeting ads.
Twitter continues to refine its targeting capabilities following the launch of Tailored Audiences last year. More recently, Twitter launched tools to enable marketers to create tailored audiences from email lists and CRM databases, target TV conversations for Spanish-language television and connect with users through Promoted Accounts in search.
Real-time relevancyTwitter can continue to gain strength on the marketing front if the platform and marketers can develop their skills as it relates to leveraging Twitter’s real-time relevancy.
“Twitter is the best platform for immediacy and is very ‘event’ driven,” said Todd Herrold, San Francisco-based senior director of product marketing at Kenshoo. “Twitter needs to continue to develop its systems to make it easier for advertisers to take advantage of its unique capabilities in this regard.
“Advertisers in turn need to adapt their processes and enable their teams/agencies to make more rapid decisions in terms of creative to push messages out more quickly and in near real-time,” he said. “In turn, Twitter needs to find ways to keep users on site, engaged and continuing conversations, and help them discover new conversations of interest after they have moved on from the initial topics or events that brought them there initially.”
Leery traditional marketers Twitter has also introduced numerous new ad products, including mobile app install ads.
It is still unclear how successful these strategies are for marketers, which is proving to be a bigger problem for traditional marketers compared to digital marketers.
“Digital marketers are jumping in and trying the new Twitter ad products hopeful that Twitter will produce results as the targeting improves,” said Jay Hawkinson, Chicago-based senior vice president of emerging products for SIM Partners.
“Traditional marketers seem more leery of utilizing a social channel with slow or no growth, neglecting the new advertising methods to reach those 241 million monthly active users but the tide will turn if Twitter gets a positive return on ad spend,” he said.
“Ad growth will stall if Twitter stops innovating. That's why they introduced 15 new ad products and enhanced targeting earlier this month.”
The Facebook experience Facebook similarly faced challenges with the investment community following its initial public offering that lasted until its marketing offerings were better developed. The same could happen for Twitter, which went public late last year and is still evolving its solutions for marketers.
One of the more significant advancements made by Twitter on the marketing front has been its shift toward a more visual platform, with its integration with Vine and larger, more prominently displayed images.
“Continued focused on their visual platform will allow marketers to introduce more creativity into their ads,” TRIS3CT’s Mr. Witt said.
Overall, marketers are upbeat about Twitter even with its relatively smaller scale this. This is because the level of engagement continues to be strong with users, extending its reach beyond the platform.
As a result, brands are expected to continue to invest in Twitter.
“The scale of Twitter goes far beyond the platform itself,” said Craig Elimeliah, vice president and director of creative technology at RAPP, New York. “Twitter is society's 'feed' and has found itself streaming across more than just its own platform.
“People consume Twitter through so many touch points, and the marketing community creates a lot of those conduits and tributaries for Twitter to be seen and consumed through,” he said.
