If you don’t already know, Twitter IPO’d this week and so far it looks pretty good for them with their share price doubling after day 1.
What you may also know is that twitter have been losing money, and quite a lot of it, over the last few years. A few months ago, before they announced their intention to IPO, I was concerned for them as a business. Lots of businesses make money from something that doesn’t seem obvious. Online retailers can compete with others at non profit making prices and make money from financing the purchase of their products.
Other companies look at the life time value of their customers and lose money or at least don’t make money for the first few orders or even years, knowing that they will make money in the future.
But twitter, have very few customers and those they have can only make money from sponsored tweets and promoted accounts. It is tricky to make money from this sort of activity, and most companies try to use it as a Direct Response channel which is simply isn’t, unless your giving something away or your willing to lose money.
So how will they make money?
The answer is genius if you think about it.
Twitter have closed several massive deals with Ad and media houses over the last few months. But why?
It might not be totally obvious at first but Twitter are potentially after uncovering what is the holy grail in advertising, well at least some of it anyway.
So what am I talking about?
For years advertising agencies have been selling ads on the back of what can only be described as assumed data and value attributed to it. Unless your spending mega bucks it’s nearly impossible to see the value of advertising, you need to research it before and after and see how sales go and if they go up, the ad campaign was a success, if they go down, it was because of something else.
Digital ads, avoid that in their purest form. They can be tracked, attributed and run through algorithms to assign clicks to sales, well in theory at least. It’s not that easy and most activity is difficult to link back, but I think I could write a book about that.
So back to the point – Imagine you could link TV with Digital?
Well – twitter will allow you to do this through hashtags amongst other things.
If you consider for a moment the idea of second screen or multiscreening, twitter owns it at the moment. If you are watching a show you are engaged with, and your on another device, your probably tweeting about it.
Imagine that’s international rugby match sponsored by Guinness. Well now that advertiser know your saw their branding and their ads between the the brakes.
So in its simplest form, they can deliver sponsored tweets or promoted their account to try to get you to follow them.
But what their missing is ReMarketing. My guess is that’s the big kicker for them and I would guess that when they announce it, you will see their share price spike a lot! Imagine could ReMarket to people who watched your TV ad and only those people ? That’s gold dust in advertising, something Mad Men with all the drugs, booze and ladies, simply couldn’t imagine the possibilities of how it could change the game completely.
Watch this space, Twitter has chosen its path and is about to become a serious player in the ad game.
Watch Google Plus and Facebook use Lean methodologies to try and catch up!
In fairness to google, they have the best shot at it.