How Twitter Makes Money

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On January 24, eMarketer predicted that Twitter would bring in a bit over $150 million in 2011 and $250 million in 2012. (You can see the chart at the bottom of this column.) Is this realistic? I think it may be from what I have learned and am writing about below.

Twitter's "Promoted" Products

Recently my firm had a very interesting series of calls and meetings with Twitter and I got my head around all the details of its advertising or "Promoted" products. Twitter's offerings have three attributes that really struck the value/performance chord in my book:

• Cost-per-click from its Promoted Tweets
• Cost-per-action (actually cost-per-follower) from its Promoted Accounts
• Exclusivity from its Promoted Trends offering (basically Twitter's version of a home page takeover)

So here is a quick breakdown of what those products are offering:

1. Promoted Tweets: These are keyword-targeted, cost-per-click ads that appear in all Twitter search results in some applications, trending topics, and of course on http://search.twitter.com. You bid on keywords kind of like Google AdWords and can drive users to anywhere a link can go, including high-value brand engagements, videos, lead capture landing pages, etc. Currently the minimum bid is $0.50 and goes up depending on the keywords and categories in your campaign. (See example below.)
   
   
2. Promoted Accounts: These are keyword-targeted, cost-per-follower ads where you target users based on what they talk about and who they follow. This is a great way to quickly build your base of followers (basically Twitter friends who have opted in to receive your tweet messages). At the moment, and depending on the category, followers are running at about $1 to $2 apiece. (See example below.)
   
   
3. Promoted Trends: This is a flat-rate, daily sponsorship that drives huge amounts of impressions, engagements, and clicks. A sponsor can receive over 60 million impressions in one day, but it does require a rather large financial commitment. If you want to see the needle move in a short period of time, high-impression sponsorships like this and other home page buyout opportunities can be effective. (See example below.)
   
   

Twitter is also giving advertisers dashboards that let them see things like impressions, clicks, and before and after account performance and follower count stats. (See example below.)

Oh, and one more little nugget. Here is the chart from eMarketer showing the growth trend of Twitter's revenue.

Source: eMarketer

Now, if I sound like a cheerleader in this column, my apologies. I have to confess that I'm a lot more excited about these offerings than I typically get from most online opportunities. I think it's because everyone in our industry knows what Twitter is and yet so few people have actually ever advertised on it. I also think that the performance-based products genuinely offer real value – it's not just fluff. I guess time will tell on its ROI from a branding and conversion standpoint.

Harry is off today. This column was originally published on February 1, 2011 on ClickZ.