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After an experimental 2010 made $45 million from ads, Twitter could make $150 million this year
One of our more popular stories from 2010 outed Twitter’s new efforts in advertising as still highly experimental, just an exploration of the possibilities of one of the most popular microblogging platforms in the world. And that was just four months ago.
How quickly things can change.
Twitter could earn $150 million in advertising revenues this year, with the vast majority coming from the U.S., according to the latest forecast published by Internet market researcher eMarketer. Twitter declined to comment.
For a company that just raised $200 million at a $3.7 billion valuation, that might not seem like a lot of money. To compare, Facebook, which just raised $1.5 billion at a $50 billion valuation, is expected to collect $4.05 billion in 2011, more than doubling ad revenues from 2010. So Facebook raised a round seven and a half times bigger than Twitter’s at a valuation that’s 13.5 times bigger than Twitter’s, but do these things really help explain why Facebook’s revenue will be 27 times greater this year?
Perhaps that’s not being fair, though.
After all, Twitter just started selling advertising for the first time last year and only made $45 million, entirely from U.S. buyers. In 2011 and 2012, eMarketer says the company will make $150 million and $250 million, respectively. That’s some impressive growth no matter how you look at it, and the vast majority of it will still come from U.S. advertisers. Imagine if Twitter went full throttle on international advertising sales as well (Facebook’s advertising revenues internationally are already growing faster than they are domestically).
But Twitter doesn’t look prepared to go full throttle on advertising just yet.
Twitter appears to be taking a slow, gentle approach (maybe they’re still experimenting and iterating?) instead of trying to capitalize on their massive network and endless hype all at once. On one hand, they could be missing an incredible opportunity by potentially letting the excitement over the Twitter service flutter away. On the other hand, to return to the Facebook case, CEO Mark Zuckerberg has proven to some extent that a focus on development of the service, not on revenues, can be successful both for capturing a wider audience and for building the business.
Maybe Twitter’s slow experimentation will pay off, in the end. Do you think the company is intentionally taking things easy or will the site never monetize to the degree investors expect?
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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.