September 21, 2009
Twitter users are more likely to follow ads
Valued at $1 billion by investors, Twitter advertising revenue may someday best competitors
A survey of over 9,200 Internet users by Interpret has found that Twitter users are more likely to interact with ads and sponsors than users of any other social networking sites. According to Interact’s report, 24% of Twitter users versus 12% of users other sites review and rate products in online stores. Likewise, 20% of Twitter users will visit company profiles, nearly double the number of other users. Finally, when it comes to advertising or other forms of sponsored links, Twitter users are more than twice as likely to click through to the content, 20% against 9%.
Determining the source of these discrepancies is tricky, as user motivation for clicking on ads and company profiles may differ wildly from user to user, based on their own preferences. One might guess, however, that it ultimately comes down to Twitter’s utter simplicity. Instead of interacting with various parts of a multi-dimensional Web site (like photos, games, chat on Facebook), users instead merely search for their interests, peek at trends, and read posts on their feed.
Interact’s report comes at a curious time, with the San Francisco-based social networking site very close to closing a $100 million round of new funding. The fundraiser, which is expected to be finalized in the next week, will include new contributors to Twitter like T. Rowe Price Group Inc. and private-equity firm Insight Venture Partners, who will be joining return investors Spark Capital and Institutional Venture Partners.
Right now, these investors value Twitter at upwards of $1 billion, in spite of the fact that the site currently operates ad-free and without any other revenue model.
In spite of Interact’s findings and news of Twitter’s ever-swelling valuation, the site won’t be carrying advertising anytime soon, either. “Any kind of approach toward advertising is going to be a while,” says co-founder Biz Stone. Leaving out any possible leads into advertising coming in 2010, Stone adds, “we're not thinking about that just yet.”
It’ll be interesting to see, once the site finally does implement advertising, how Twitter takes advantage of its apparently highly unique user base.
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What is Twitter?
Twitter is an online information network that allows anyone with an account to post 140 character messages, called tweets. It is free to sign up. Users then follow other accounts which they are interested in, and view the tweets of everyone they follow in their "timeline." Most Twitter accounts are public, where one does not need to approve a request to follow, or need to follow back. This makes Twitter a powerful "one to many" broadcast platform where individuals, companies or organizations can reach millions of followers with a single message. Twitter is accessible from Twitter.com, our mobile website, SMS, our mobile apps for iPhone, Android, Blackberry, our iPad application, or 3rd party clients built by outside developers using our API. Twitter accounts can also be private, where the owner must approve follower requests.
Where did the idea for Twitter come from?
Twitter started as an internal project within the podcasting company Odeo. Jack Dorsey, and engineer, had long been interested in status updates. Jack developed the idea, along with Biz Stone, and the first prototype was built in two weeks in March 2006 and launched publicly in August of 2006. The service grew popular very quickly and it soon made sense for Twitter to move outside of Odea. In May 2007, Twitter Inc was founded.
How is Twitter built?
Our engineering team works with a web application framework called Ruby on Rails. We all work on Apple computers except for testing purposes.
We built Twitter using Ruby on Rails because it allows us to work quickly and easily--our team likes to deploy features and changes multiple times per day. Rails provides skeleton code frameworks so we don't have to re-invent the wheel every time we want to add something simple like a sign in form or a picture upload feature.
How do you make money from Twitter?
There are a few ways that Twitter makes money. We have licensing deals in place with Google, Yahoo!, and Microsoft's Bing to give them access to the "firehose" - a stream of tweets so that they can more easily incorporate those tweets into their search results.
In Summer 2010, we launched our Promoted Tweets product. Promoted Tweets are a special kind of tweet which appear at the top of search results within Twitter.com, if a company has bid on that keyword. Unlike search results in search engines, Promoted Tweets are normal tweets from a business, so they are as interactive as any other tweet - you can @reply, favorite or retweet a Promoted Tweet.
At the same time, we launched Promoted Trends, where companies can place a trend (clearly marked Promoted) within Twitter's Trending Topics. These are especially effective for upcoming launches, like a movie or album release.
Lastly, we started a Twitter account called @earlybird where we partner with other companies to provide users with a special, short-term deal. For example, we partnered with Virgin America for a special day of fares on Virginamerica.com that were only accessible through the link in the @earlybird tweet.
What's next for Twitter?
We continue to focus on building a product that provides value for users.
We're building Twitter, Inc into a successful, revenue-generating company that attracts world-class talent with an inspiring culture and attitude towards doing business.
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