Whether you love it or hate it, Twitter is difficult to ignore.
The micro-blogging site has had a phenomenal rise to prominence, and its reach is way beyond any reasonable expectations that its founders may initially have had. If it lacked one thing it was the ability to convert its popularity into steady and sustainable commercial advertising revenue Twitter. Well, that particular issue would now seem to have been addressed. The social media group now appears to have landed a commercial deal which will expand its advertising revenues and secure its long term future.
Twitter has struck a deal believed to be worth several hundred million dollars with the Starcom Media Vest Group (SMG), a division of Publicis, one of the biggest players in US advertising. Just how big, is best judged by the size and scale of some of its clients, which includes Proctor and Gamble, Microsoft and Coca-Cola.
So what’s in the deal for SMG? Well, though the actual details remain sketchy, reports are indicating that SMG will get access to high-level Twitter data and research for its marketing purposes and its customers will get preferential access to the best advertising slots on Twitter. Some reports even suggest that SMG will get a direct feed of data from Twitter into its modelling tools.
Why now, is the next question?
Why is SMG offering Twitter the deal now, rather than a few months back? Well, it would appear that part of the attraction is that Twitter is now a far more attractive proposition since its acquisition of data analytics company, Bluefin Labs, in February. That acquisition has made Twitter much more attractive as a partner to advert-placing firms. The social media is also an advertiser’s dream because if the wealth of precise information it has at its disposal. This information allows marketers to tailor messages to precise groups of people, based on their age, gender, interests and any affiliations they have expressed through social interactions.
So what will the proposed deal mean in the longer term for Twitter? Well, for one it will certainly give some credence to Twitter’s contention that it is an attractive advertising platform, and it will be able to use the deal as evidence that it is finally gaining traction as a worthwhile marketing tool. In spite of its undoubted popularity, and a worldwide audience of what is reputed to be over 200 million users, it has struggled to extract the kind of revenues that it should. Any previous advertising was seen by many to nothing more than an experiment as businesses dipped their toes in to test the waters. The latest deal would suggest that advertisers are now convinced:
“In about 18 months, Twitter has gone from an experiment to [being] essential”, Laura Desmond, chief executive of SMG, told the BBC.
What will this and similar deals mean for Twitter? Well, the revenues Twitter raises from advertising are expected to almost double this year compared with last year, with further big rises anticipated in future years, according to eMarketer, a research consultancy. eMarketer estimates the micro-blogging site will earn $582.8m (£381m) from advertising in 2013, rising to nearly $1bn in 2014.
Will Twitter then follow Facebook and float on the stock markets? If the evidence from Facebook’s floatation is anything to go by; then probably not. Facebook shares are currently trading at about $26, well below the launch price of $38.