3 Ways Twitter Will Make More Money Without Having To Change

Dick Costolo TwitterAPTwitter CEO Dick Costolo

Traders trying to work out the future of Twitter shouldn’t be looking at the front end of the site, but behind the scenes.
In the last couple of years, Twitter has built all the infrastructure it needs to be able to flick a switch and increase its revenue almost instantly.

That’s good news for users as well as shareholders: if Twitter’s front end already contains all the hooks it needs to turn it into a profitable company, then the sudden much-feared increase in advertising on the site might never materialise.

“We are expecting Twitter ad revenues to grow significantly over the next 12 months without the need for Twitter to make any substantial changes,” says Matt Wheeler, the chief executive of digital marketing firm Driftrock which has been experimenting with different strategies for building revenue via Twitter.

Wheeler sees three major events that will drive up Twitter’s ad revenue without the site needing to substantially change its image to users.

Twitter is mobile-ad first

The first is the fact that adoption of the mobile web is hampering Twitter’s value to advertisers. While businesses still have clunky, desktop-only sites, the return on investment spent on Twitter adverts is going to stay low.

“With Twitter mobile usage at 80%, once businesses catch up with the mobile revolution Twitter’s ad products become viable for far more companies,” says Wheeler. There’s no point in advertising to users who can’t take action if they click through to the site.

The second is that Twitter has changed the focus of the sort of ad products it produces. “Twitter’s initial portfolio of ad products focused on brand advertising, but they have begun releasing ad products designed for direct response like Twitter’s Lead Cards,” Wheeler explains.

Twitter is for brand-building

Brand advertising is the Twitter equivalent of John Lewis’ annual Christmas adverts. It’s designed to build awareness of companies and their brands, but not necessarily lead directly to sales. That means it’s the province of brands with deep pockets: perfect for a company trying to get a bit of early revenue, but not the makings of a balanced diet.

The company’s new Lead Cards are of more interest to the small and medium businesses who currently don’t bother with much Twitter advertising. They let advertisers ask for users’ email from within Twitter, letting them follow up with direct adverts as and when they have something to sell.

Wheeler predicts that “as more advertisers see returns from direct response, revenues are likely to scale fast”.

Twitter ads can go global

The biggest potential gains for Twitter are the ones that can be had by just flicking a switch. At some point soon the company will roll out self-service ad buying in territories other than the US. Currently, only American businesses can sign up and purchase ads with just a credit card and an online dashboard, but once that changes, a whole new segment of the market opens up.

Twitter would still need a small outlay to enable payment processing in further territories, but once it happens we “should see fast growth in ad revenues as [small and medium] advertisers join the party”, Wheeler argues.

And advertisers will be likely to join the party in droves. Some of Driftrock’s clients have found customer acquisition costs drop to single-digit pounds with the use of Twitter — and even overtake Google Adwords as the main way of getting new business.

But the crucial aspect of these changes for users is that none of them will result in a drastically changed experience. The same ads will be where they always have been, but they’ll be sold for more at the back-end, and offer more options to the user at the front.

That’s small comfort for people turned off by the company’s last major pre-IPO alteration — inline image previews. Those are here to stay. But Twitter’s future isn’t necessarily as ad-laden as we might have feared.

• On the day of their IPO, Twitter “were overly cautious and it cost them some money”

This article originally appeared on guardian.co.uk

NOW WATCH: Tech Insider videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.