Twitter Sharpens Focus On Monetization

A lot has been happening with the best-known microblogging service, Twitter, of late. There was speculation that the company was going to be a $8 billion to $10 billion acquisition target for Google and Facebook early this year. That hasn’t happened, but Twitter has been busy acquiring third party Twitter application TweetDeck and advertising company AdGrok. And that is not all – Apple has decided to integrate Twitter deeply into iOS5 when it releases the operating system later this fall.

Integrating Twitter in the iOS5 will provide Apple with a social networking platform. It will also allow iPad, iPhone, and iPod Touch users to Tweet from their cameras, photo libraries, Google Maps, Safari, YouTube, and other apps. But why not go for Facebook, the largest social networking platform with more than 500 million users?

Joe Wilcox on Betnews says:

“Apple and Facebook actually have several conflicting strategic objectives, and their platforms are juxtaposed. Apple wants to push users’ content to the device, whereas Facebook wants to pull content to the cloud. The differences will be starker when Apple rolls out iCloud, presumably concurrently with iOS 5 and iPhone 5 in the fall.

… Apple wants user content flowing freely among the devices it sells, while Facebook’s priority is content going into the service – and not easily coming out.

… Apple can provide its customers the benefits of status, essentially using Twitter as part of a social networking framework, without taking on Facebook baggage and becoming dependent on a growing competitor for customers’ time and content.”

Apple will definitely benefit from its new social status mechanism, and so will Twitter, which has about 200 million users. Apple recently announced at its WWDC event that it has sold 200 million iOS devices. That number keeps growing at a very fast rate, and Twitter gets a chance to hook into that user base.

Twitter’s Recent Acquisitions

TweetDeck, launched in 2008, is an application that organizes everything happening on Twitter. It was one of the first third party applications to become popular with Twitter users and has a user base of millions. Twitter says the acquisition will help Twitter provide a powerful platform to brands, publishers, and marketers. Twitter is reported to have agreed to pay about $40 million for the deal. The TweetDeck acquisition is part of Twitter’s strategy to build up a suite of applications. It acquired Tweetie in 2010 and renamed it Twitter for iPhone. In 2008, it purchased the Summize search engine and made it Twitter Search.

Within a week, came the news that Twitter is acquiring advertising platform AdGrok for less than $10 million. AdGrok simplifies the process of running internet marketing campaigns for small businesses and it will now focus on developing Twitter’s monetization platform. Tom Cheredar of VentureBeat reports:

“The purchase of AdGrok may signal that Twitter is ready to start formulating what kind of data is relevant to performance rather than rely on third-party services to do it. One thing that is very certain is that Twitter is looking to create a much more involved advertising platform for clients wishing to promote their messages through Twitter.”

Twitter’s Monetization Model

Twitter is reported to be charging $120,000 per day for Promoted Trends, up from last year’s rate of $30,ooo per day. With the help of AdGrok, Twitter is looking to provide advertisers data on performance that could help them better target consumers.

Twitter has also started selling access to its data. Data on what content consumers are sharing sell for a premium and Twitter has recently started capitalizing on that. It recently entered into deals with two companies, Mediasift and Gnip, to sell such data. It should also sign deals with ad networks and publishers.

I said earlier that there is a serious gap in Twitter’s monetization strategy. It has 200 million accounts and is expected to triple its ad revenue in 2011 to $150 million. Twitter should take a page out of Groupon’s monetization playbook. Groupon’s revenue model is not based on the meager advertising revenue but rather on revenue sharing. Twitter should also look at revenue sharing with merchants for real-time deals.