Majority of Revenue on Social Network Comes from Phones; One Advertiser Calls Results Staggering
Twitter Inc. is showing early signs of success selling advertising on mobile devices, an area that is bedeviling Internet companies including Facebook and Google.
On most days, Twitter is now generating the majority of its revenue from ads shown to its users on mobile gadgets, rather than from ads on Twitter.com, company executives said. One key reason: People who see a Twitter ad on their phones are more likely to click or interact with it in some way, which is how Twitter gets paid for advertisements.
The San Francisco company has only been offering mobile ads in earnest since April, and some companies buying Twitter ads said they haven't kept tabs on the effectiveness of their campaigns on mobile devices.
But P.F. Chang's China Bistro Inc. is among the advertisers that say they were surprised at how many people are clicking on Twitter mobile ads.
The Scottsdale, Ariz.-based restaurant chain this winter spent $25,000 to pitch a Lunar New Year promotion to people on Twitter. P.F. Chang's arranged to push posts promoting dining rewards to Twitter users, including those searching for terms such as "Chinese New Year," on their mobile phones or their personal computers.
In the first four days of the campaign, P.F. Chang's said roughly 1 million people clicked, recirculated or otherwise interacted with the Twitter ad. Of those people, roughly 70% did so from mobile devices rather than computers.
As P.F. Chang's began seeing the results, the company quickly shifted that entire Twitter ad budget to mobile, said Jason Miller, digital content and community manager for P.F. Chang's.
Mr. Miller said.
"The results were staggering."
He added that P.F. Chang's in April kicked off another $25,000 Twitter ad campaign to pitch lunch offerings. Mr. Miller said it hasn't been as effective in generating clicks or in pushing up restaurant sales.
He speculated that Twitter ads may be better for time-sensitive events rather than for awareness-building efforts. Mr. Miller said.
"That may be where Twitter ads fall flat."
Twitter says its mobile-advertising business is working because a company can easily convert any tweet into an ad.
The format of ads on Twitter's mobile and desktop sites are the same, and advertisers pay the same rate no matter the platform. On many mobile services including Google's, ad rates are lower in part because advertiser demand is lower.
Twitter also says its users are more active on mobile devices, which may explain why interaction with ads is higher, too. About 60% of its 140 million monthly users access the service on mobile devices.
Adam Bain, Twitter's president of global revenue said.
"We know that mobile is how people access Twitter, it's where people are overall, and we know it's where the business is."
Twitter, which is closely held, declined to specify its ad revenue. But eMarketer Inc. forecasted that Twitter will earn $288.3 million in total ad revenues in 2012, up 106.7 percent on last year, and will see further gains over the next two years, with $807.5 million anticipated by 2014. The research firm and other analysts don't break out Twitter's revenue forecasts from mobile devices.
eMarketer projects that Twitter will earn $129.7 million in mobile advertising revenues from the US in 2012. Facebook, which rolled out mobile ads for the first time this year, will come in at just over half that amount, at $72.7 million in the US.
Investor expectations are high that Twitter, which has a private-market valuation of roughly $8.4 billion, can amp up its advertising sales ahead of an initial public offering that people close to the company expect in a year or more.
Overall, the potential growth in mobile advertising is enormous, but elusive for many companies. U.S. advertising on cellphones and tablets reached $1.6 billion in 2011—only about 5% of all ad spending, according to the Interactive Advertising Bureau.
Some research shows consumers are more likely to notice ads on their phones, in part because they still are novel. But smaller screen sizes than PCs, less sophisticated ad targeting and wariness by advertisers is holding down ad rates or spending on mobile devices.
Executives at Google have said they are devoting resources to close gaps in the ad rates they make from mobile devices compared with PCs. The lower cost of Google's mobile ads compared with those viewed on a desktop have contributed to an overall downturn in the average amount paid by advertisers every time someone clicks on an ad, the company has said.
Google recently made it simpler for more than one million of its advertisers to buy ads across platforms.
In October, Google said it was on pace to generate $2.5 billion annually in mobile-ad revenue, its last public figure on the topic. The company made about $36.5 billion in revenue from advertising last year.
Facebook, which made $3.15 billion last year from advertising, has only begun experimenting with mobile ads, selling what it calls "sponsored stories," in which marketers pay Facebook to republish positive messages that users post about their brand.
The mobile-ad push is crucial given that more than half of the social network's 900 million users access the site on mobile devices. NOTE: In late September 2012, Facebook officially annoiunced that it reached billion users.
Carolyn Everson, Facebook vice president of global marketing solutions said.
"We've seen powerful indicators that when people see sponsored stories on mobile they engage."
Doubts remain that Twitter's ad business—which is about two years old—will ever be as big as Facebook's or Google's.
eMarketer analyst Debra Aho Williamson said.
"Twitter still has a lot of growth to accomplish before they can make advertising a big business."
Still, CloudOn Inc. is a Twitter believer. The Palo Alto, Calif., business-software company said its Twitter ads helped generate close to 10,000 downloads of its free document-software app for Apple Inc.'s iPad.
Jay Zaveri, CloudOn's vice president of product and marketing, said when the start-up targeted Twitter ads in the past few months to mobile devices, about 2.5 of every 100 ads resulted in an app download—about three times the download rate of ads on Twitter.com, and better than other advertising services CloudOn has used.
He said.
"It's been a very good experience."
COMMENTARY: In August 2012, eMarketer foreasted that U.S. would reach 81 million mobile social network users -- 33.7% of total mobile phone users and 25.9% of the U.S. internet population. By 2014, there will be 116.8 million mobile social network users --
It's probably a safe bet that since most of Twitter's U.S. advertising revenues are from mobile, which is the reverse of Facebook (which has more desktop ad revenues), then Twitter's worldwide advertising revenues are mostly from mobile.
The following infographic prepared in February 2012 reveals a brief of history of Twitter, that Twitter has been growing very rapidly and now has over 475 million users, the majority (107.7 million users) of its members are located in the U.S. and they generate 175 million tweeets each day.
Click Image To Enlarge
You can gain a very good understanding of just how Twitter compares with Facebook and other major social networks, by reviewing the following infographic:
Click Image To Enlarge
Courtesy of an article dated June 28, 2012 appearing in The Wall Street Journal and an article dated September 13, 2012 appearing in AllTwitter
Comments