Retailers Are Using Twitter Ads More – which Should Help its Upcoming IPO

by Jon LeSage, edi­tor, Used Car Mar­ket Reports

“Grow your local busi­ness today with Twit­ter Ads” – That’s the sub­ject line of an email Twit­ter has been send­ing out late­ly explain­ing how Twit­ter Ads can dri­ve sales to your local busi­ness. Not long ago, Twit­ter was con­sid­ered a fun place to post 140 char­ac­ter mes­sages to friends – but more recent­ly its’ become an essen­tial mar­ket­ing chan­nel for retail­ers, up there with Face­book.

Twit­ter is fol­low­ing Facebook’s path by launch­ing an ini­tial pub­lic offer­ing some­time soon that could sub­stan­tial­ly increase its mar­ket val­ue. The com­pa­ny has already met some of that tar­get – see the chart above for a snap­shot of how Twit­ter has grown from about $1B in mar­ket cap in 2009 to about $9B this year. That’s come through ven­ture financ­ing and pri­vate trans­ac­tions – going pub­lic could shoot up that mar­ket val­ue. Last week, Twit­ter made its prospec­tus pub­lic, pro­vid­ing a first glimpse at its finan­cial health.

Face­book is more typ­i­cal­ly about friend­ing, but Twit­ter like­ly has an edge for con­sumer inter­est-group nich­es and B2B mar­kets. Twit­ter has been mak­ing mon­ey since last year through adver­tis­ing, much of it mobile. Spon­sored tweets that resem­ble reg­u­lar user posts has been a method Twit­ter is sell­ing. Some would say Twit­ter is an even more effec­tive mar­ket­ing chan­nel than Face­book for reach­ing tar­get­ed con­sumer and B2B seg­ments.

The fun­ny this is that Twit­ter has been steadi­ly los­ing mon­ey for a while – with a net loss of $79 mil­lion last year and $69 mil­lion for the first six months of 2013. It’s not a big deal for a lot of investors – since Twit­ter has shown growth in adver­tis­ing sales, investors are like­ly to val­ue its stock based on their expec­ta­tions of future rev­enue and prof­it.

For some adver­tis­ers, Twitter’s 218 mil­lion peo­ple isn’t a big enough audi­ence. That’s been their mes­sage to Twit­ter Inc. after the com­pa­ny released details on its IPO.

In its fil­ing, Twit­ter said that 75% of its users entered the ser­vice through mobile devices dur­ing the sec­ond quar­ter and that 65% of its rev­enue came from mobile ads. That is sharply high­er than the num­bers of Twitter’s much big­ger rival, Face­book, which had vir­tu­al­ly no rev­enue from mobile when it went pub­lic last year. Face­book is see­ing strong results in mar­ket val­ue since its IPO – and Twit­ter stands a very good chance of mak­ing sim­i­lar gains.

Sources:

New York Times

Finan­cial Times

Wall Street Jour­nal

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