Internet Business: Twitter

Thesis StatementThe maturity of Twitter has come about due to the

increase of advertising tools available to advertisers to

target specific audiences and therefore increasing

revenue.

Tahlia Manners, Aru Wade, Andrew Samson, Emily Tan Mei Shan

History• Ex-Googler Evan Williams had a start up called Odeo. It was going to be a

podcasting platform.

• Evan asked his friend, another ex-Googler named Biz Stone, to join him.

• Evan and Biz and an Odeo employee named Jack Dorsey decided to create

something called Twitter instead.

• In March of 2006, Odeo had a working Twitter prototype. In July, TechCrunch

covered Twitter for the first time.

• Both Evan and Jack did not know what Twitter really was. They just thought it

was another social network or a new microblogging site.

Twitter: A Network and Attention

EconomyTwitter is the prime example of both an attention and network

economy

• The attention economy is the balance between advertisers receiving attention from

online audiences and for those audience to also receive attention from their own content

(Davenport & Beck, 2013)

• The “attention economy motivates participation in peer-produced sites on the Web”

(Yardi et al., 2009). The more a person’s Tweets are noticed, the more motivation they

have to continue tweeting.

• These days, “Businesses can no longer simply buy their customers’ attention, but instead

they have to earn it” (Honigman, 2014). This is why advertisers are finding new ways on

Twitter to promote their product in an engaging way to receive attention (e.g Oreo “You

can still dunk in the dark” Super bowl ad)

Twitter: A Network and

Attention Economy• The Network economy consists of the “highly interactive, real-time connections

among people, devices, and businesses” (MIT Technology Review, 2014).

• Amalgamation of human collaboration and interaction and frictionless commerce

(MIT Technology Review, 2014). Has strengthened with the increase in technological

devices to support even greater connectivity and more networks.

3 P i l l a r s of a Ne twork Economy

Earning Customer Loyalty

Enabling Open Innovation

Enhancing Resource Optimization

• Twitter incorporates these three pillars in its advertising mechanisms, connecting

advertisers to users.

CompetitorsTwitter’s mega revenue streams are unmatched and continuously increasing

(advertising, brands joining, and investing in startup companies) there isn’t direct

competitors however competitors are catching up, below are list of few companies

generating impressive revenues

• Facebook : Social networking service founded February 4 2004 by Mark Zuckerberg

(Facebook reported second-Quarter revenue of $2.9 billion, significant increase of 61%

from $1.8 billion year ago. Mobile advertising grew 151%)

• Instagram : Online sharing, mobile photo-sharing, video sharing and social network.

(Bought by Facebook for $1 billion, it has a revenue potential of $500 million a year)

• Yammer: Private social network that employees elaborate across departments, locations

and business applications (yammer acquired by Microsoft for $1.2 billion, Yammer

generates $250 million per quarter)

Uses of Twitter: Campaign

management• Twitter helped Barack Obama become the first black president of USA.

• In 2008, Barack Obama (@BarackObama) used the Internet to successfully

reach voters and organize supporters in ground breaking ways.

• The President used digital platforms like Twitter to stay connected with

Americans, share personal and policy insights

as well as respond to breaking news in real time.

• In April of 2012, the President announced

his re-election campaign in a video

titled “It Begins with Us”

posted on his website.

• Twitter took the limelight when the Iranian government barred journalists

from covering the 2009 elections.

• A Lot of criticism of the lack of Iran related coverage on CNN but Twitter kept

the world updated in real time on what was happening

• Young Iranians went on Twitter to tweet what’s going on to the world.

Iran elections: Twitter Revolution.

• Twitter is becoming an outlet for news as well despite it being a 140 word

character maximum microblogging site, it succeeded at grabbing the

attention on those who love reading news.

Uses of Twitter: Political

Activism

Revenue and Monetisation of Twitter

• After 7 years of operation, Twitter is worth more than $18bn.

• Twitter has approximately 232 million monthly users, but the

company is not profitable - yet.

How does Twitter make its money and how can we

explain its high valuation?• 85% of revenue comes from advertising which has increased 129% on a year to

year basis

• $277 million profit in the second quarter financial report of 2014 • Twitter charges its advertisers according to the amount of interaction their

content generates.

Engagement rate formula: n u m b e r o f r e p l i e s + n u m b e r o f r e t w e e t s / b y t h e n u m b e r o f

f o l l o w e r s X 1 0 0

Growth Factors• Key growth driving factors=spike in user engagement, the number of unique visitors

and mobile traffic (Sikka 2014) on Twitter.

• As a result, company shares rose by 29% in the second quarter report for 2014 (Goel,

2014)

• “Twitter's staffers share more detailed analysis of user data to help with ad

campaigns” allowing advertisers to further identify their audiences. (Koh &Vranica, 2014)

• "One of the advantages of Twitter for marketers over traditional display

advertising is they have worked really hard to make sure that advertising on

Twitter is not interruptive," which attracts a greater user base due to the non-

invasive advertising. Lara O'Reilly, senior reporter at Marketing Week

Analysis of Advertising TechniquesTwitter enables advertisers to target an audience based on a variety of factors,

including a user’s ‘Interest Graph’. This graph is created from data such as,

users followed and tweet creation and engagement.

Mobile Advertising

Twitter’s advertising appeal comes from a combination of:

• the large user base

• the active nature of said user base

• and its integration into a wide variety of devices

This equates to ad’s reaching over a billion devices, creating more than 130 ad

requests per month.

These statistics plant Twitter as a leading competitor in the attention economy

of the internet.

Analysis of Advertising TechniquesPromoted Tweets

For a fee, Twitter will integrate tweets into relevant users timelines. This is done with the

goal of providing a service to:

• Drive website traffic by asking users to click on your best content

• Offer coupons and deals in the copy of your Tweets

• Drive leads using Lead Generation Cards

• Promote sales and giveaways

Promoted Trends

• Created as an extension of the promoted tweet.

• Trends are utilized by advertisers who want greater control over their campaign.

• Grouping together relevant tweets and integrating it into Twitter’s pre-existing list of

trends.

Why Twittertargets companies to

advertise during major

sporting events: Case

Study

1 5 0 m i l l i o n t w e e t s @ 2 0 1 2 # L o n d o n O l y m p i c s3 2 . 1 m i l l i o n t w e e t s @ 2 0 1 4 # F I F A W O R L D C U P

2 4 . 1 m i l l i o n t w e e t s @ 2 0 1 3 # S u p e r B o w l

Promoted Tweets: 2013 Super Bowl• 20.9 million Super Bowl-related tweets were sent during the game, nearly 30%

were about the ads (Indvik, 2013).

• Procter & Gamble opted for creating 22 Vines and related tweets for their

product Tide, joking on other brands' ads involving messes that Tide could

clean up and using the promoted tweet #GetsItOut

• The real-time aspect allows Tide to release

this picture via Twitter which generated

3.6 million impressions via thousands of

retweets.

• “engaging consumers with "authentic

brand content at a relevant time." (Neff, 2014).

• Oreo “you can still dunk in the dark” promoted tweet reached out to 3

million Twitter users.

• Received 15,700 retweets was favourited by 6,500 users.

• Helped to attract 7,700 new followers for Oreo

• Using the cost per engagement formula, Twitter earned $495

from each new Oreo follower (Indvik, 2013) from advertising fees.

Promoted Tweets: 2013 Super Bowl

Promoted trends: FIFA World Cup• Twitter held an event to auction off Promoted Trend Packages 11 months

before the commencement of the event.

• Currently, global promoted trends are costing between 150,000- 200,000 US

Dollars

• Increased to $600,000 for the World Cup

• Gold, Silver and 2 Bronze packages for the 2014 FIFA World Cup

• Gold package: six promoted trends to run on six days, including the dates of

the final game and one of the semi-final games =$3.6 million (Delo, 2013).

• All together, the reserve price of the four packages comprising of 16

promoted trends is $8.16 million (Delo, 2013).

Premium Days• Increases the cost of all advertising to improve revenue on days where

user engagement is expected to be high.

• “During the Nov. 6, 2012 American Election Day and other key days

during the presidential race, Democratic and Republican marketing

teams purchased the Promoted Trend for more than the normal

$120,000” (Heine, 2013).

• This was used during the Super Bowl and the FIFA world cup where

Promoted Trends increased 600,000 dollars and promoted tweets

increased to 200,000.

Promoted Videos• Launched this year in August in response to Twitter’s public listing.

• Twitter will sell Promoted Videos on a cost-per-view model, charging

advertisers when a video ad begins playing.

• Tested with the 2014 Tour De France where sponsor The Specialized

Bicycling Components, had success with the first tested promoted video (parish, 2014).

• “Powered by Promoted Tweets, broadcasters reach new audiences and

open up new business lines. Brand advertisers get, for the first time, an

integrated cross-platform tool for reaching the social conversation

wherever it happens” (Twitter, 2014)

Twitter ’s Investment: Vine• Vine is a video sharing-editing company acquired by Twitter in October 2012

• Twitter reportedly paid $30 million for the acquisition.

• If this video services was launched with Twitter it would have had plenty of

competition from other video sharing services like Viddy, Keel and Tout)

• Twitter’s strong following provided a quick exposure of this to app to users.

• A risky investment by Twitter however on January 24th 2013 Vine was officially

Launched as a free App for IOS devices and later released for Android.

• This has further expanded twitter’s revenue and market share and has matured as a

successful internet business with an expected 2014 third quarter revenue total

between $330- $340 million.

Conclusion“The maturity of Twitter has come about due to the increase of advertising tools available

to advertisers to target specific audiences and therefore increasing revenue”

These tools include

• Promoted Tweets

• Promoted Trends

• Promoted Videos

• Premium Days

• Mobile Advertising

How do they target

specific audiences?

• Push notifications

• Selling user activity to

advertisers

How this has increased

revenue?

• Major international sporting

events e.g FIFA World Cup,

Super Bowl and Tour De

France

• Attracts high user

engagement rates due to

real time marketing

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