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Promoted Tweets Fly the Coop

By John P. Mello Jr. E-Commerce Times ECT News Network
Feb 4, 2015 9:20 AM PT

With Wall Street breathing down its neck for growth, Twitter on Tuesday launched a new advertising initiative that aims to boost revenues and add to its more than 284 million members.

Promoted Tweets Fly the Coop

The initiative aims to expand the reach of "Promoted Tweets" on Twitter. Promoted Tweets are ads that Twitter inserts into its members timelines. Currently, promoted Tweets are only seen on Twitter, but the company wants them to be seen elsewhere, too.

Initially, two outlets will be participating in the new program: the mobile app Flipboard, and Yahoo Japan.

"For the thousands of brands already advertising on Twitter, these new partnerships open a significant opportunity to extend the reach of their message to a larger audience," Ameet Ranadive, a senior director at Twitter, wrote in a company blog.

"Twitter syndicated ads will be seen by users within Twitter content sections on third-party properties, as well as within third-party content areas," he added.

Lagging Growth

Advertisers aren't the only target of the new initiative, maintains Greg Sterling, vice president of strategy and insight for the Local Search Association. "Twitter has had difficultly expanding its core base of engaged users, and this move is in part a response to Wall Street demands for stronger growth," he told the E-Commerce Times.

What's concerning Wall Street can be seen in the latest worldwide ad revenue numbers for Twitter from eMarketer. They show revenues increasing from US$594.5 million in 2013 to $2.7 billion in 2016. However, during that period annual growth steadily declines from 120.7 percent in 2013 to 46.3 percent in 2016.

"The concept of running Promoted Tweets on other people's apps and sites makes a lot of sense," said Andreas Scherer, the managing partner at Salto Partners. "It essentially gives Twitter the opportunity to grow its reach and generate revenue well past beyond its own user base.

"This announcement might be calming down some investors who are worried about Twitter's ability to organically grow its user base," he told the E-Commerce Times. "Now, the company is still reporting net losses on a quarterly basis. Very soon, these kinds of business ideas have to shed some real profits for Twitter to continue to command a premium on its share price."

Anachronistic Approach

Twitter has been successful with advertising targeted at its members logged on to its site, but Wall Street wants to see the company garnering ad revenues outside its site. The question is, will flogging Promoted Tweets on apps and websites produce the revenue growth Wall Street wants?

"I don't think a Promoted Tweet will be that compelling because it just becomes another display ad and display ads are going downhill at the moment," said Jan Dawson, chief analyst at Jackdaw Research.

"One of the benefits of Promoted Tweets is that they sit within the Twitter interface, so they look like tweets," he told the E-Commerce Times. "They don't stand out. They're native advertising.

"Tweets on third-party sites are not native at all," he continued. "They're different looking content from what else would be on those sites. From that perspective, it doesn't check any of the boxes of what advertising should be these days.

"It should be highly targeted," he added. "It should be native. Promoted Tweets feel like old-fashioned display ads that just happen to look like a tweet."

Notoriety's Not Money

Twitter may also be overvaluing the advertising community's enthusiasm for Promoted Tweets outside the Twitterverse. That's because Promoted Tweets carry a burden found on all ads placed through an advertising network.

"The challenge with these ad networks is that the inventory is not viewed with the same level of value by advertisers," explained Larry Chiagouris, a marketing professor at Pace University.

"As you go from an original source, like Twitter, which has a good handle on who its users are, and go to these third party locations, less and less is known about the people who are seeing the material," he told the E-Commerce Times. "Advertisers see less and less value in that.

"I'm not saying what Twitter is doing is of no value," he added, "but it's not going to be the same value that its current audience provides advertisers."

Given the proliferation of hashtags on the Net, television and in print, it's a wonder why Twitter hasn't been able to convert that ubiquitous exposure into cash. "The public perception of Twitter is out of proportion to the actual media footprint of Twitter," explained John Carroll, a mass communications professor at Boston University.

"Twitter has an outsized image among the public because of two groups that use it extensively -- the news media and the entertainment industry," he told the E-Commerce Times. "They make it feel like everyone is tweeting. They're not."

Added Nate Elliott, an analyst with Forrester Research, "If notoriety was the same thing as revenue, Twitter would be doing really well."

Twitter did not respond to a request for comment for this story.


John Mello is a freelance technology writer and contributor to Chief Security Officer magazine. You can connect with him on Google+.