DM CONFIDENTIAL – During the Super Bowl, we found ourselves having to bite the bullet and not only accept that Twitter is here to stay, but more importantly, it just might become more pivotal than Facebook within the advertising ecosystem. Were I technical, I would spend all of my time playing with their APIs in advance of the moment when they release a Twitter Ads API. You know that companies like Marin Software, Kenshoo, Efficient Frontier and so on are all making preparations for such a time. As an entirely different means for spending money, though, it’s just about anyone’s game.
For advertisers willing to spend at least $5,000 per month, Twitter has a sales operation, one that’s not speedy in replying to inbound requests, but that is set up to onboard new advertisers. Here are the products that they offer.
Most users are familiar with Promoted Accounts, whether they might think so or not. Before it became a source for revenue, it was a means to increase engagement. It’s a common issue with any new platform — making sure people have “friends” and don’t feel alone. Twitter was the first to emphasize a one-way relationship in that users can follow another person without that person having to follow back. Social platforms that focus on friends rely on dual acceptance. If one side chooses to connect or be friends, the other side must give permission. Facebook and LinkedIn are two examples. They all want engagement to grow, and being able suggest new interactions is a key driver.
Twitter’s Promoted Accounts reside on the web version of Twitter, off to the left-hand side of the screen. It’s a super-interesting problem to think about, not too dissimilar from what Amazon does when looking to recommend books, or Netflix with movies. Twitter also has a lot of relational information about its users, a series of connections that, if analyzed correctly, should help with the suggestion process. There is also empirical data about whether a user, in general, tends to follow based off of suggestions (an individual user’s will-follow score) and whether a suggested user gets followed (a relevancy score), the latter being more important in the refinement of their algorithm. Having enough users and enough brands that want to spend means the ability to apply the suggested knowledge for profit, and it’s a genius move — innocuous, yet not cheap. They are able to charge $2 or more per follow. If the average user follows a mere three promoted brands per year, that would earn the company, assuming just 20 percent of their 100 million “active” users are active, more than $100 million per year. They aren’t close to that yet, but you see the potential. Even better, it’s an easy metric to refine to make the company more money. Increased relevancy means a more active marketplace. More money per follow plus more follows per user equals bling.
Promoted Tweets in Timeline
From a user experience standpoint, Twitter is unlike anything else. We are used to RSS feeds, used to Facebook’s Newsfeed, and now even LinkedIn has a curated/aggregated homepage experience of ever-changing information based on its users activity. Twitter is just one thing, one screen of very rapidly refreshing information displayed from its users. It’s a miracle that any are read. Follow more than a handful of users, and your above-the-fold glimpse refreshes almost by the minute. It’s a very crowded inbox that presents Twitter a challenge and an opportunity. It’s a challenge to make the user experience rewarding enough for users to keep publishing, but it’s an opportunity to extract revenue.
Promoted Tweets make sure a brand’s message appears in a user’s timeline — your users and/or users similar to your users. They are performance-based, with brands charged on clicks on links inside the tweet, favorited tweets, replies and retweets. It is also another great algorithm opportunity for Twitter, and a new challenge. What is the right engagement threshold? How do you show one over another? With what frequency do you rotate them? How do you price them? Creating a new platform isn’t easy. As for revenue, this one is tricky, because it’s all about what percentage of users engage. A safe assumption is a banner click, so think 0.10 percent. There are a huge number of tweets, so it helps make up for the engagement rate. If we assume a conservative 1 billion tweets per day, we have 1 million interactions. At $0.50 per interaction, we have a potential for $500,000 per day in revenue.
Promoted Tweets in Search
With so much data, you need a way to make sense of it all. One of the company’s first acquisitions was a site that used Twitter’s own APIs to enable searching the platform. The company has come a long way since then, but still don’t confuse this search with traditional search. It’s very good for certain things, but arguably most useful for ego searches and searches around a particular conversation. The keywords in this case are keywords, user accounts and hashtags. Hashtags in particular are a quirk of Twitter and one of the most confusing pieces for any new user. They help anchor any tweet to a topic, but unlike user accounts, they’re completely free-form. I can #makeupanytag about #anytopic #anytime. It’s become the standard format for either associating with a conversation or creating one.
Promoted Tweets in search are as it sounds — having your tweet show up when a search is done around a keyword, hashtag or user. As is the case with promoted tweets in the timeline, brands pay on a per engagement basis. They have in place an algorithm to show the best-performing tweets and a marketplace so that competition between brands can exist. They are able to get higher dollar values out of this, because it is more targeted in nature. They probably have a higher engagement rate as well, so the revenue might come closer to timeline tweets than the volume might suggest.
The Twitter homepage has changed over time. Today, the emphasis is on signing up or signing in, whereas in the past non-registered users could easily view some of the activity. One such piece that still exists today is global trends. It’s a Twitter-wide lens instead of just that dialog that takes place inside a single user’s timeline. It’s a very interesting view, and a good snapshot into the users of Twitter.
Promoted Trends is/are the most expensive option. It is tailor-made for brands that need to spend a lot when advertising and want to say they have huge exposure. It’s also the least performance-based option. Prices begin around $125,000 per 24-hour period. Currently, they offer just one, making for another down and dirty eight-figure revenue option.
Twitter has taken the first enormous step. It has started to monetize its user base in a way that surely makes them cash flow positive, all without hurting the cultural buzz that made them this big in the first place. We don’t see talk about monetization killing the user experience — namely, we don’t see its marquee users complaining. That is huge and no doubt worth the wait when it comes to monetization. Next up is most likely either a) yield management — getting more from what they currently have; b) increasing the advertiser pool through self-service when ready; and c) new inventory. With the last possibility, they have started showing promoted products in the mobile environment, but the company has also created new impressions by repacking its content with intelligence. The latest is the discovery tab. It makes Twitter a more newspaper like experience and is a huge step towards making it more accessible. I think of it as the primer to the firehouse, where you go first. What we haven’t discussed but will play a role – geolocation. So much of Twitter’s publishing takes place with additional location information, including potentially time sensitive information when using the platform on the goal. It’s such a wide-open world of lack of information and work that needs to be done. Might this be the next opportunity for the early adopting performance marketing space?