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Twitter scores by moving the goal posts

Matt Kapko | Aug. 4, 2014
Twitter is moving the goal posts and Wall Street likes the new numbers it sees up on the scoreboard. The company's monthly active user base grew 24 percent from the year-ago period to 271 million, but the actual reach of Twitter goes well beyond that, the social media company claims.

Excluding the curated World Cup experience Twitter initiated during the month-long competition, the company's timeline views jump 15 percent year-over-year to 173 billion. "Mobile also contributed to be a strong driver in the quarter with 81 percent of total ad revenue generated from mobile devices," marking a 67 percent gain from the year prior, says Mike Gupta, who is leaving his post as CFO to become the company's senior vice president of strategic investments.

In some ways, Twitter's fortunes are improving in line with the company's capability to make more from less. "Ad revenue grew 129 percent on a year-over-year basis, despite a 35 percent decline in cost per ad engagements. The increase was driven by total ad engagements which grew more than 250 percent year-over-year, reflecting higher quality ads, improved prediction and targeting, and the increased use of rich media by advertisers," Gupta adds.

Twitter makes no money off unique visitors that aren't logged in to the site or tweets that are embedded elsewhere, but the company is beginning to "experiment" with those audiences in an attempt to change that. Costolo says the company is not monetizing those off-network audiences today, but that it probably will over the long term using the same types of ad units it delivers on Twitter today.

Growing reach and audience is all well and good, but until Twitter can derive revenue from syndicated content, mentions and its overall popularity in other media, its financial gains and outlook will be limited.

Amplifying Twitter's Reach in Mass Media

The good news for Twitter and its investors is that the path to riches on off-network media is already well-defined. The company's TV ad targeting mechanism, Amplify, enables networks and content creators to extend their reach beyond organic followers and increase the tune-in to their audiences, says incoming CFO Anthony Noto.

"Amplify is the perfect example of how we can increase that tune-in and create a bigger audience for the content producer and the content licenser, which drives more advertising dollars," he says. "Ultimately it will pay more for that content and that content producer will want to partner with Twitter."

Leveraging relationships with celebrities and institutions in media and entertainment has been Twitter's approach for many years now. Rarely does a primetime show or major sporting event go off without a reference to Twitter or more likely a detailed plan to engage fans with a hashtag or promotion in real time.

Indeed, despite a user base that's just one-fifth the size of Facebook, Twitter is oftentimes dominating the public conversation and rising to the top of popular culture. The National Basketball Association just announced that its official handle (@NBA) will be on every official game ball for the upcoming season. That level of mass media promotion just doesn't happen as often for Facebook these days.

 

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