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Friday, October 25, 2013

Advertising Takes Off On Twitter

Twitter, the short messaging service, is planning to migrate to Wall Street.

Twitter, the short messaging service, is planning to migrate to Wall Street.

Twitter is beginning its IPO roadshow on Monday. Company officials and underwriters will travel the country making presentations to institutions and individuals, in hopes of boosting its stock offering next month.

The social media giant plans to initially sell 70 to 80 million shares, roughly 13 percent of the company, for between $17 and $20 each. They hope to bring in between $1.4 and $1.6 billion with the IPO, trading under the name TWTR.

The company is being valued at about $11 billion. That’s more than Yelp and AOL combined, but it’s still modest for the social media giant. Some analysis had predicted it would be valued at as much as $15 billion.

The cautious valuation is being seen as a way to avoid the pitfalls that Facebook faced during its IPO. But as the finances of the company stand right now, the company had a third-quarter net loss of $64.6 million — though quarterly revenues more than doubled to $168.6 million.

In an attempt to increase revenue, Twitter is expanding its ads. One key audience for those ads may be the people who live tweet while they’re watching TV.

“They will figure out the best way to maximize this desire for people to interact with each other while they have this same media experience,” Here & Now media analyst John Carroll says. “I think that’s where the opportunities are.”

Guest

Transcript

JEREMY HOBSON, HOST:

It's HERE AND NOW.

As Twitter prepares to go public, it is valuing itself at about $11 billion, much smaller than Facebook, which is now worth about $128 billion. Twitter is heading out on the road to sell itself to investors and convincing those investors that growing its ad revenue will happen, will be key.

Joining us to talk about Twitter's advertising options is HERE AND NOW media analyst John Carroll. John, welcome back.

JOHN CARROLL, BYLINE: Nice to be here.

HOBSON: Well, let's start with the promoted tweets, the ad platform that Twitter uses the most currently.

CARROLL: Right. And that was the first one that they introduced a few years ago. And basically you pay to have your marketing message, your message, whatever it is, inserted into people's timeline, what they call the timeline, which is the Twitter stream. So it will be there. It will be marked a sponsored tweet, and it would just be part of the flow of the Twitter messages that you're getting.

HOBSON: And I have to say that unlike, you know, a Facebook-promoted ad, the tweets, because they're so short, they actually do get read. I read the promoted tweet. Much as I don't want to be reading it, I do read it because it's right there.

CARROLL: Right. And you see more and more digital publishers, more and more social media networks, what they're doing is they're incorporating the marketing messages into the content stream. So it looks like what you're seeing that's actual editorial content, it looks like it. And that, for a lot of publishers - digital publishers - is the most effective way to sell advertising at this point.

HOBSON: But it's not enough for Twitter. I know because I was just out there in San Francisco and met with some of the people at Twitter, and they are talking all about TV.

CARROLL: TV - because people are tweeting while they're watching TV in increasing numbers. So just the "Breaking Bad" finale, there were 1.24 million tweets...

HOBSON: Yeah.

CARROLL: ...during the - during that hour. So this is a platform where it's the second screen. And what's happening is a lot of TV viewers are engaging with each other through Twitter or Facebook or some other social media network. And so what you have is this opportunity to get some kind of engagement with these people who are obviously engaged with the show because they're talking about it.

HOBSON: And you might be able to sell the advertiser that's advertising on the TV show a separate ad during the show on Twitter so that the person gets two hits of the same ad.

CARROLL: Right. And so you know who the people are who are tweeting, so you direct the message directly to them and may get retweeted. One estimate is that for everyone who's tweeting about a show, they're reaching 50 times that number.

HOBSON: Wow.

CARROLL: So if you have a thousand people tweeting about a show, you've got 50,000 people getting that tweet.

HOBSON: Now, Fast Company is also reporting that Twitter is hoping to get TV stars to be tweeting. What's that about? Where's the money in that?

CARROLL: Well - and basically what they're doing is they have deals with the digital marketing operations ad networks. And they will do advertising. They'll promote the shows. They'll advertise themselves through Twitter. What they want is to get the stars to tweet because people may follow "Breaking Bad," but it's much more likely that they would want to follow Bryan Cranston. And so if they can get these stars to engage on Twitter, they think that that's going to open up opportunities to reach millions and millions of people.

HOBSON: And companies are extending advertising campaigns on to Twitter, putting some of the characters from the commercials on there. The character Mayhem from Allstate Insurance's TV ads started tweeting just a few weeks ago.

CARROLL: Right. It was a contest, basically, to decide which commercial for a college football game - which character Mayhem would play. Twitter is all about engagement, and that's what advertisers want. If they can get people to engage with them. And that's one of the tricky parts of it, because you can't just use Twitter necessarily to send out marketing messages.

Ideally what you do is you form a community around your brand and then you let them talk to each other. You let them interact. And every once in a while you want to jump in to the mix. But the idea that Twitter is just a billboard that you would just send out marketing messages on, that's not the most effective way to use it.

HOBSON: But should we be concerned as consumers, the way that many people are about Facebook, that they are taking a lot of information about us in order to send these directed ads at us?

CARROLL: Yeah. The data mining is going to get more and more intrusive, I think, with Twitter because data mining is a source of revenue, a potential source of revenue for them. They can track people. They can track them across platforms. So if you sign in to Twitter from your laptop, you sign in to Twitter from your smartphone, you're signing in with the same identity.

So there's a lot of potential there. They're looking to data mine. They're looking to place ads on other sites. They're looking to target their Twitter users by their interest, by their gender. Whatever subdivision you might want to employ, they're looking to somehow maximize that.

HOBSON: John Carroll, as somebody who follows advertising and marketing very closely, is this idea of a second screen for advertising with the TV and your mobile device or whatever to be able to advertise to both of these places, is that a game changer for marketers?

CARROLL: I don't know if it's a game changer. It's a game expander, for sure. How prevalent it's going to become is hard to tell. Facebook has 1.1 billion users.

HOBSON: Yeah.

CARROLL: Twitter has 232 million. So when you look at the relative size of it, it really doesn't match up with Facebook. But marketers will get more and more sophisticated as they go along, and they will figure out what's the best way to maximize this desire for people to interact with each other while they're having this same media experience. And I think that's going to be where the opportunities are.

HOBSON: Yeah. Many people don't realize it, but we are still in the very early days of marketing online and on mobile devices, especially.

CARROLL: Absolutely.

HOBSON: John Carroll, media analyst for HERE AND NOW and a mass communication professor at Boston University. Thank you so much.

CARROLL: My pleasure. Transcript provided by NPR, Copyright NPR.


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