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 Pi l lars of a Network Economy Earning Customer LoyaltyEnabling 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:

number of rep l ies + number of retweets / by the number of fo l lowers X 100

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 AdvertisingTwitter’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 Twitter targets companies to advertise during

major sporting events: Case Study

150 mi l l i on tweets @ 2012#LondonO lympics

32 .1 m i l l i on tweets @ 2014 #F IFAWORLDCUP

24 .1 m i l l i on tweets @ 2013 #SuperBowl

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

Project Diary

Project Diary Link button >

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