Twitter is expected to bring in more than $1 billion in advertising revenue in 2014, according to a report.
Two people “with knowledge of the matter,” who are apparently irked at some analysts’ low forecasts, told Bloomberg that ad revenue would be “at least” $1 billion before the company’s ninth birthday. By comparison, eight-year-old Facebook generated more than $3 billion in ad revenue in 2011.
A Twitter spokesperson declined to comment.
Estimates published by eMarketer earlier this year suggest that the Twitter will only generate $540 million in ad revenue in 2014 — about double what eMarketer forecasts the San Francisco-based startup will bring in this year. Growth will be driven in part by Twitter’s self-service advertising platform for small businesses, which launched in November, and by international expansion, eMarketer said. Currently, 90% of ad revenue come from U.S. companies.
Unlike many other web-based publishers, Twitter doesn’t depend on display advertising for the bulk of its ad revenue. Instead, it has launched a suite of “Promoted” products that allow companies to increase the visibility of specific accounts, tweets and trending topics. Adam Bain, president of global revenue for Twitter, says Promoted Trends and Promoted Tweets yield engagement rates between 3% and 10% on average — many multiples higher than the average banner ad.
1. Use Promoted Trends or Promoted Tweets to Publicize an Event
Twitter is all about discovering what’s going on right now. As Bain notes, many users return to Twitter’s homepage a few times per day just to see what’s trending. Promoted Trends leverage that phenomenon by giving advertisers a premium position on the page.
Bain says that this can yield much higher engagement rates than standard online advertising, for example, banner ads. Introduced in 1993, banners have notoriously low click-through rates, even though such advertising is still growing rapidly. (Proponents of banners also point out that, while the ads work fine for raising awareness, direct sales are still measured by clicks.)
Nevertheless, Bain says Promoted Trends and Promoted Tweets yield engagement rates between 3% and 10% on average, and sometimes much higher than that. For instance, Volkswagen got 52% engagement on an April 18 Promoted Tweet for its 2012 New Beetle launch.
In this case, engagement is defined by click-throughs (which usually accounts for 80% of the total), retweets and “favorited” tweets. The buying process for Promoted Trends and Promoted Tweets and all of Twitter’s ad products follow a model similar to Google’s — marketers buy them in an auction at a cost-per-engagement rate, and then pay based on engagement.
Obviously, if you’re running a Promoted Trend or Promoted Tweet, it helps if you have some kind of news, product launch, or associated event. For instance, For instance, Coca-Cola earned high engagement during the 2010 World Cup — whenever a goal was scored, Coke would unleash a celebratory tweet.
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