Has Twitter cracked the mobile market?

Technology giants such as Apple and Facebook have seen their share prices plunge. But that hasn’t stopped the experts predicting Twitter, founded by Jack Dorsey, will head to the stock market with a market value of at least $9bn. Arabian Business investigates how the company may have finally cracked the elusive mobile advertising market
By Massoud A. Derhally
Sun 03 Feb 2013 09:07 AM

It was a week Apple executives would rather forget. A share price below $450 is not what CEO Tim Cook had in mind when he launched the iPhone5 last year, but after announcing lower-than-expected profits, the stock market verdict was brutal — wiping more than $50bn off the company’s market value.  Coming after the disastrous IPO of Facebook, the experts have been quick to suggest that the heyday for technology stocks may finally be over.

But drive exactly 61km up the road to the global headquarters of Twitter in San Francisco, and the mood is markedly different. The world’s largest media real-time micro-blogging website has evolved from a simple social media platform since its inception in 2006. Though not yet public, like Facebook, Twitter is well on that path after raising about $1.2bn privately from the likes of Prince Alwaleed, Jeff Bezos of Amazon and Benchmark Capital, among a number of other investors. In January, some of Twitter’s employees sold $80m in shares to a fund managed by asset managers BlackRock, according to the Financial Times. So what does that firm led by Jack Dorsey have that its social media competitors don't?

Though the company is highly secretive about its statistics and future, much like Google and Facebook, Greencrest Capital — a research and advisory company that assesses companies that have yet to go public — believes Twitter may list by the end of this year or in 2014. If true, that move would come after Twitter reshuffled part of its management at the end of last year, entered into strategic alliances with Nielsen, American Express and Pinterest, leveraged a strong mobile uptake of its site and expanded abroad. Some projections estimate the IPO could value the firm at  $9bn while Greencrest says the figure could be as much as $11bn and possibly more if the company manages to illustrate a propensity to reap higher revenue growth.

In one year the company doubled its user base to 200 million in 2012 (vs Facebook’s 837 million users) with about 70 percent of its users coming from outside the US and revenue reaching $300m. The company sees eleven new accounts created every second, according to Infographics Labs (that’s about 1m new users every day) and has recorded over 160 billion tweets since it was created. President Barack Obama’s tweet in November marking his election victory was the most retweeted of 2012.

While there may be a lot of sceptics out there after Facebook saw its valuation plummet, Twitter’s future will not only depend on supporting different types of users but also  on its ability to monetise itself as a real-time marketing tool across non-conventional platforms. That, for instance, means enabling companies to attract followers, as well as tracking and building their audience simultaneously, all the while being able to keep an eye on the competition.

While many have struggled to get people to click on ads on mobiles, the mobile frontier — on which many social network sites are focusing — appears to be an area Twitter has cracked. The company has reported a 75 percent year-on-year growth in mobile, putting it ahead of Facebook and LinkedIn’s growth, according to Greencrest.

If anyone had any doubt that the future of social media is in mobile, they should think again. Over 60 percent of Twitter subscribers use the site on their mobile devices, says Shailesh Rao, a former Google executive poached by the micro-blogging site to head up its international operations. Marketing on the site leads to between a one and three percent engagement rate, which is as much as 30 times better than traditional advertising, Rao says.

The company is believed to be reaping more from mobile ads than from ads placed on its traditional desktop website. In 2012, Twitter earned $135m in mobile ad revenue from the US market while Facebook recorded $339m and Google $2.2bn, according to eMarketer. Twitter’s projected mobile ad revenue is forecast to increase by about 85 percent this year and more than double in 2014.

“Central to the ability of an online platform to drive offline commerce, in our view, is a robust mobile offering,” Greencrest’s analysts maintain in their report. “Mobile sits at the intersection of online and offline commerce, as we believe users looking to make real world purchases are increasingly turning to social media for information.”

Four drivers have been key to Twitter’s success. The first is that its ‘device agnostic’; it’s able to work smoothly on a desktop, a tablet or mobile in a fairly seamless manner, says Max Wolff, one of the authors of Greencrest Capital’s report. The site has also been adopted as the leading wire service for the global news business, becoming a preferred breaking news platform with journalists sourcing stories off Twitter globally or distributing them through it.

That “keeps your engagement up and makes the platform relevant,” says Wolff. Unlike Facebook “it’s not just social and is increasingly becoming an official conduit of communication,” he adds.

Also critical to Twitter’s success are sponsored stories and sponsored tweets, which have shown traction with advertisers. In addition, the company has begun to articulate what Wolff says are “very potent partnerships”, such as the alliance with Nielsen. That tie-up provides the possibility for Twitter to become the dominant software interface.

“As people watch television they’re interacting with the programme via Twitter, which allows you interact with the ads,” says Wolff. “It means that the producers and stars of television and movies will need to have a large Twitter engagement and this drives people into the system, meaning a higher level of engagement with more time spent on the platform.”

Essentially this means that Twitter and Nielsen together could become an important way of monitoring audiences on television shows, which would then allow Twitter to begin siphoning away television ad revenue and advertise against television.

Spending on online advertising surpassed $100bn last year and is set to increase by about 15 percent in 2013 to $118bn, according to a report by eMarketer. Online and mobile ad spending are projected to account for almost 22 percent of the total amount spent on ads in 2013, with emerging markets being the fastest source of growth in countries like Indonesia, India, Mexico and the Middle East.

“Twitter is most convenient for mobiles and the number of mobile users in the Arab world is a lot larger than internet users. With the high rate of smartphone adoption, it’s a good strategy with potential,” says Jawad Abbassi, founder and general manager of the Arab Advisers Group.

Of the top ten websites visited by 135 million users from the Arab world in October 2012, Google took the top spot with nearly 122 million unique visitors, reaching 90 percent of the digital population in the Middle East and Africa, according to comScore data. Facebook attracted 101 million unique visitors, putting it in second place, followed by Microsoft with nearly 76 million unique visitors. Yahoo! followed with 68 million, and Twitter came in tenth place with 15.2 million visitors.

The Middle East is one of the fastest-growing markets for Twitter. The site was instrumental during the protests that swept the Arab world over the past two years. It helped activists organise and arguably was a key ingredient in the toppling of leaders in Tunisia, Egypt, Libya and Yemen.

“Obviously we saw a tremendous growth in our user base and not just due to the Arab Spring but the ongoing conversation in the region about things that matter to people here,” says Rao. “In the last twelve months we’ve seen a tripling of our active user base in the Middle East. It’s one of the fastest-growing regions for us in the world in terms of active users.”

Last week, Twitter entered into an agreement with Egypt’s Connect Ads, much in the same way that Facebook did the previous year, to churn out its advertising and sales products of promoted tweets, promoted accounts and promoted trends across Egypt, Saudi Arabia, the UAE, Kuwait and Pakistan. The firm had already deployed a similar strategy in the US, the UK, Japan and Latin America.

Promoted tweets enable brands to target tweets to certain users. The brand pays about $0.5 when the user engages by retweeting, replying, clicking or marking a tweet as a favourite. Promoted accounts allow companies to promote their account with keyword-targeted, cost-per-follower ads where users are targeted based on what they talk about and who they follow at a cost of $1-$3 per follower. Promoted trends enable companies to leverage the use of hashtags to promote their own brands and trends with daily sponsorship that drives impressions, engagements, and clicks, for a flat-rate of as much as $120,000.

Qatar’s Al Jazeera English, which was only carried in three US cities in 2011, and which wanted to expand its reach during the revolution that toppled Egyptian leader Hosni Mubarak two years ago, used promoted trends on Twitter to boost awareness with the hashtag #demandaljazeera. Promoted tweets drove live-stream views and allowed users to submit news items, resulting in an 8.8 percent engagement rate for a total of 92 promoted tweets across 4 million impressions, according to Twitter documents seen by Arabian Business. Promoted tweets increased the channel’s daily follower rate by fifteen times to over 200,000 total followers, with Twitter being a top referrer to Al Jazeera’s website. The result? Traffic surged by 2,500 percent.

North America accounts for about 31 percent of Twitter’s total active users, followed by Europe and Asia which each make up for 20 percent, then South America which represents 16 percent and each of the Middle East and Africa accounting for 5 percent. That compares with Facebook, which has around 24 million users in the Middle East out of its one billon users globally.

The Middle East “can be a significant revenue contributor to the business”, says Rao.

Digital media will more than double its share of the Arab world’s advertising market by 2015, according to a survey by Deloitte. Digital is the fastest-growing media platform in the region and accounted for 4 percent of the total ad spend in 2011. Deloitte expects digital to grow at a compound annual growth rate of 35 percent over the next three years, generating about $580m across the region by 2015.

“For the last five years, every year we have been saying ‘this is the year of the mobile’, but now we are starting to see the momentum because the technology and speed is available — so is software development,” says OMG MENA CEO Elie Khouri. “We are trying to leverage that for clients. I won’t say we have cracked mobile, but we are cracking it.”

Twitter would argue it already has. Time will tell.

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