Ad Growing Pains for Twitter
Twitter co-founder Jack Dorsey returned to the company last week and walked right into a micro tweet-storm: a new feature dubbed "QuickBar" rolled out on its own mobile app, triggering backlash from vocal users, in part because it placed a Twitter ad product, "Promoted Trends," on top of users' friends' missives.
But the kerfuffle points to a central challenge for Mr. Costolo and Mr. Dorsey, who is head of product development: where and when to interrupt the flow of tweets to introduce relevant ad messages without annoying users.
At this point, plenty of marketers big and small have tried out Twitter's three ad products, Promoted Tweets, Promoted Trends and Promoted Accounts, which are selling well. But as ads on Twitter grow up and the experimental phase ends, marketers are starting to ask for the kind of basics they get from other marketing partners -- namely, better targeting and analytics.
"If Twitter was to integrate targeting, it would be a game changer," said Shiv Singh, PepsiCo's head of digital who uses Twitter frequently in his campaigns. "As soon as Twitter learns to do that, the business opportunity will explode."
Plenty of big publishers and social networks, from CNN to MTV to Facebook, allow precise targeting of consumers, which doesn't exist on Twitter. Mr. Singh's wish list for targeting included location targeting. "If I buy a promoted tweet and [want to target ] 20-something males who live in urban areas," he said. That wish is coming true: company confirmed an AllThingsD report that geo-targeting has begun in metropolitan areas.
In addition, more research needs to be done on the impact and value of retweets, the amplification effect that gets marketers so excited about Twitter. Marketers have spent the past few years scrambling for "likes" on Facebook, but the retweet is potentially more powerful.
"They aren't completely monetizing the value of their ad product because they don't know how to count and predict the influence of the retweets, of the long tail," Mr. Shiv said.
Part of the difficulty of targeting on Twitter is that Twitter doesn't actually know much about its users. Profiles are typically short, a quick bio blurb and sometimes a location or name, but definitely not the kind of granular information people give Facebook.
Another aspect of geo-targeting that's on the wishlist for some is the ability to send tweets to consumers in different time zones. Adidas, a brand that uses competitor Facebook often, had this very request for Mr. Dorsey.
"From a global perspective, geo-targeting tweets would be a huge plus for Adidas and something we would love to see," said Gabriel Jaffe, head of global digital communications.
Ryan Holmes, CEO of Twitter client Hootsuite, said that many companies he works with could use some kind of time-sensitive geo-targeting tool. "Wouldn't it be cool if you could send one message, and say, 'I want this message to show up at 11:45 a.m. worldwide?'" Mr. Holmes said. "So that way, everybody sees a tweet from McDonald's saying 'Aren't you hungry?'"
Naturally, what can follow that kind of targeted message is the potential for group discounts, and many professional Twitter users suggested that a Groupon-like layer on top of Twitter could change how Twitter works and how people use it. Other than an information highway, Twitter can become part of the consumer experience in terms of e-commerce and mobile payments. Twitter and payments are closer than we think already -- even as he comes back to Twitter, Mr. Dorsey will remain the CEO of Square, a mobile-payments company he co-founded two years ago.
Twitter has stormed past 200 million registered accounts -- which puts it in a league with Facebook, at 650 million -- but there has been some debate over how many of these accounts are active. A significant number of Twitter accounts both have no following or follow no one, indicating they're not active. Twitter hasn't released figures; one proxy is to look at the 25 million people who visit Twitter.com in the U.S. each month, according to ComScore, assuming Twitter users visit the site at least once a month.
According to eMarketer, Twitter earned $45 million in advertising revenue last year, well below Facebook's $1.8 billion. ComScore measured Facebook's monthly U.S. uniques at around 150 million.
Like Facebook, Twitter has spawned an ever-growing third-party ecosystem of apps and services, a sign of the company's success. While Twitter has a great relationship with many of these companies -- including Hootsuite and Klout -- it's recently begun to be tougher on some developers. Twitter said that while current Twitter clients can continue as they are, new developers should focus their Twitter powers elsewhere.
But industry analyst and angel investor Paul Kedrosky said Twitter should be cautious about disrupting its third-party ecosystem. Businesses built on Twitter can play a role in helping the site figure the best model, and can shoulder some of the load of innovation. "I think Twitter needs to make it obvious that it has no plans in that area," Mr. Kedrosky said. "But will help developers build fantastic product to service brands, which are crucial for Twitter's success."