Twitter got hammered following its 2013 earnings announcement. Its shares fell by 20 percent in a day, as user growth fell for a fifth straight quarter. There was talk that its stock was trading at twice its true value. It was serving more ads, but getting less money for each one. Facebook was making three times as much revenue per user as it was.
It amounted to a lot of business analysts forecasting stormy waters. But the future of Twitter the social network rises and falls entirely on the future of Twitter the advertising platform. With Twitter’s ad offering still finding its feet, as Twitter moves past a bumpy start to 2014 it seemed a good time to talk to people who were already working with advertisers here to assess its health as a marketplace. Does Twitter have the pieces to compete with Facebook? Can it be profitable while growing its user base at only 3.8 percent a quarter? Does it have to change?
I spoke with three adtech experts to get the answers: Bob Buch, CEO of Social Wire, an automated social advertising agency; Matt Ackley, Chief Marketing Officer of San Francisco-based Marin Software; and Ron Schott, Senior Social Media Strategist at the Seattle-headquartered Spring Creek Group.
Short version: Twitter is an incredibly unique and effective platform, but it could learn a lot (of what to do and what not to do) from Facebook.
How capable is the Twitter advertising platform right now?
Bob Buch, Social Wire: Twitter’s advertising is capable but in order to capture big budgets and reliable ad dollars, it will need to follow Facebook’s footsteps into direct response advertising [ads that prompt an immediate action]. Twitter has been quietly building out the infrastructure to do just this, from tailored audiences to conversion tracking but it is early.
Matt Ackley, Marin Software: A good number of our clients are using Twitter as an advertising medium. I think generally, I’m very bullish with the results we see. What intrigues me about Twitter is being able to derive some context around your advertising. At Marin, we advertise on Twitter around our white papers we publish and can target people in ad tech, people who say, read Ad Age or PandoDaily. We can get the people we want to reach and then combine that with a quasi-layer of intent.
Ron Schott, Spring Creek: Tapping into real-time conversation is something that Twitter’s advertising products allow our clients to do incredibly well. Add to that Twitter’s focus on analytics and targeting and you’ve got a pretty compelling proposition.
If Twitter’s growth curve stays stagnant, how much more can it monetize its current user base?
Ackley: In terms of its advertising revenue, Twitter is still in its exponential growth phase. The efforts now are being led by more sophisticated advertisers, working out who they can target and how they can target. But as things become more mature and auctions for ad impressions get more competitive, the value it will get per user will grow a lot.
Schott: Twitter’s taken what I’d consider to be a conservative approach to monetization. Facebook, and we’ve seen it recently with their cull of ad formats, went out with an “let’s get all the ads we can get out there” approach that confused everybody. Twitter’s measured approach here means they’re still focusing on monetization, but not driving away their user base.
Can Twitter make itself more accessible while protecting the essence of the site?
Buch: I think it should just lean in to the benefits that real time discussion offers people. The essence of Twitter has always been a real-time feed that is focused on what is happening right now. Facebook has at its core always been a place for communication among friends, while Twitter’s openness may give it an advantage when displaying ads in the feed. Users may indeed find it a more native experience to see an ad when it’s not juxtaposed with messages from their close network of friends.
Schott: Yes. People use Twitter differently than Facebook. They dip in and out, making each experience a little different. The nature of consumption means that Twitter can provide ad opportunities to users multiple times during the day, but it doesn’t seem to be overwhelming.
What is the unique offering on Twitter advertisers can’t get anywhere else?
Buch: Twitter uses the people and brands you follow as a targeting signal. However, unlike Facebook, people tend to curate the people they follow on Twitter more often because otherwise their feed will be inundated with posts they don’t want.
Acksley: Facebook is predominantly all about audience. There’s always a lot of talk about parsing and deriving some advertising context from that. But Facebook exists because of its reach and audience. There, I know that someone is 45 and a golfer. Twitter users don’t have the intent of someone searching Google, but the interesting thing is being able to know the context around what they’re talking about.
Schott: Being able to accurately tell when people have seen a brand’s ad on the TV, then serve them content via Twitter taps into how people are consuming content these days. Twitter’s at an incredible advantage here because the conversations on their platform are public.
Where is the ceiling for Twitter?
Buch: I think Twitter has a lot of room to grow and could reach Facebook revenue levels. They have the second mover advantage in that they know exactly what their roadmap needs to be.
Ackley: I just don’t see it getting to the level of search and Facebook, which is not anything to sniff at, at all. It is just easier for the average person to contribute to Facebook versus Twitter.
Schott: Well, obviously you end up seeing Twitter as an “and” not an “or” type of network, which I think is okay. I think the pieces are all there for it to be as big as anyone, with the exception of being able to target by location, which it needs to address.
[illustration by Brad Jonas for Pando]