Not all social media players are looking to go public. Recently, Twitter CEO Dick Costolo reaffirmed his intentions to keep Twitter private. Costolo claims that “five years from now Twitter will remain an independent company.” Twitter’s belief is that remaining private and independent is the best course of action.
Twitter does not disclose most of its financial and operational metrics. According to analyst Semiocast, Twitter has more than 500 million users. However, active users are a lot fewer at an estimated 140 million. Analysts estimate that Twitter will generate $1 billion in revenues by 2014. Per a recent report by Peter Kafka at All Things D, Twitter is on track to generate overall ad revenues of $350 million this year. Some researchers believe that at those revenue levels, Twitter may be finally turning in an operating income.
Twitter remains focused on international expansion and mobile growth. Costolo claims the company’s “biggest advertising challenge is making sure revenue reflects the percentage of users that exist and use Twitter in these various countries.” Twitter is hopeful that the sharpening focus on mobile will also help it to grow internationally.
Acquisitions and a Strong Promoted Tweets Program Bringing in Mobile Revenue
Recently Twitter acquired Clutch.io, a service that simplifies and speeds up the process of iOS and mobile app testing and use analysis. Terms of the deal were not disclosed, but Clutch will shut down its service offerings by the end of the year and make them open source instead. Although Twitter has not disclosed how it plans to leverage the acquisition, the market is hopeful that the Clutch team will help Twitter develop and improve its mobile offerings.
Twitter’s mobile ads are doing well, and management has seen days when revenues from mobile ads are more than non-mobile revenues. In fact, Twitter noted that its Promoted Tweet program generated more revenues on mobile than on the desktop app within two weeks of the launch of the mobile app for the program. Twitter claims that as of June 2012, more than 60% of users accessed Twitter through their mobile devices.
According to eMarketer, during the current year, Twitter will generate $130 million in mobile revenues. Compare that with Facebook, which is expected to generate just over half that, or $72.7 million, in mobile revenues in 2012. Analysts believe that Twitter has surpassed Facebook because the core nature of Tweets of being less than 140 characters makes them more mobile friendly. On the other hand, Facebook was essentially a website that also become a mobile app. But that is changing soon.
Facebook’s recent acquisition of Instagram is helping the former improve its performance compared with Twitter. According to a comScore report, in August 2012, Instagram surpassed Twitter’s mobile usage statistics. Instagram saw an average of 7.3 million daily active users in the U.S. compared with Twitter’s 6.87 million. And it is not just user base: Instagram also manages to engage its users for a lot longer. The report revealed that compared with Twitter, Instagram users spent 44% percent more time online on their mobile apps than that spent by Twitter users.
Twitter may have more smartphone users – 29 million compared with Instagram’s 22 million users – but surely Instagram’s image sharing services are being used more. Twitter had launched its image sharing service last year. But the service recently reported a bug that was causing trouble in the photo uploading feature. Twitter is working to fix that problem. Despite Twitter’s efforts, eMarketer believes that Facebook will manage to surpass Twitter’s mobile ad revenue share by next year. In 2013, Facebook is expected to generate $387 million in mobile ads compared with Twitter’s $272.6 million.
Both Twitter and Facebook realize the big opportunity within the mobile ad market. eMarketer predicts that the industry will grow from $2.6 billion this year to $12 billion by 2016. It will not be an easy battle, but Twitter is taking the right steps to capture a bigger share of this high-growth market.