By Chris Lee
Eighteen months after Facebook’s much-maligned initial public offering (IPO) on tech exchange Nasdaq, another major social media site – Twitter – floated. Unlike Facebook, Twitter opted to offer its shares on the New York Stock Exchange (NYSE), which many commentators have said contributed to a smoother and more successful launch.
Twitter’s stock was initially priced at $26 per share, rising as high as $50.09 before settling at $44.90 at the close of trading. That represented a 72 per cent rise in the first day – a clear sign of the excitement investors have for Twitter and its future. Especially impressive given in its seven-year history Twitter has yet to turn over a profit.
Papers filed ahead of listing showed Twitter made a loss of $69 million in the first half of 2013, but that revenues were rising sharply – up from $28 million in 2010 to $317 million by the end of 2012.
NMK spoke to Jon Myers of software-as-a-service provider Marin Software – which manages $5 billion-worth of ad spend globally – about the monitisation challenge that faces Twitter.
The next challenge for Twitter
Myers believes the first dilemma facing Twitter – given that advertising will be its key money-spinner – is not to alienate its existing audience while delivering returns for its investors.
“The challenge for Twitter is how can it accelerate the commercial returns for investors whilst, at the same time, not alienating its loyal user base,” he told NMK. “It needs to figure out how to innovate with new ad formats that deliver for brands without compromising the clean simplicity that made it popular in the first place.”
Looking to the future, Myers expects Twitter to experiment with different innovations and, if Facebook is anything to go by, take a few wrong turns along the way.
“Like Facebook, who are now above their initial IPO price, I expect them to strike the right balance in the long term through ad innovation, offering value for advertisers and investors alike,” he added.
Twitter is already broadening its advertising options, Myers said, making more inventory available and expanding its algorithms to balance when ads are shown throughout the day. However, the speed the site moves at and the volume of tweets a second – about 9,000 – raises questions about the reach of promoted tweets, he believes.
“Having said that, it already understands that most users access Twitter via mobile and is targeting adverts to this channel, which is something Facebook admitted it took longer to do,” Myers concluded. “The challenge for advertisers remains how to get the best return on investment from Twitter ads and how to measure that in a consumer’s path-to-conversion. As Facebook has successfully proven, social media channels can become a reliable source of profit for advertisers and the channel itself. Twitter will need to find its place in the consumer’s online path-to-conversion and provide consumers with engaging adverts that deliver a return for advertisers. A lot of brands seem to be taking a watching and testing stance with paid Twitter advertising, and Twitter’s challenge post-IPO will be to convert these brands into fully-fledged Twitter advertisers.”