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By: Mike Calvey


mcalvey@gmail.com
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What is It?

Twitter is a free social messaging utility for staying connected in


real-time.

Growth

Hitting mainstream media with real time messages as important


events happen. (US Airways crash Jan 16th 2009 jump off point)
4.5 million unique visitors according to Compete.com as of 12/08
752% Growth in 2008 (compete.com data)
3 million messages tweeted daily
Web market share has passed Digg
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Twitter’s Revenue Model Needs to Accomplish Two Things To


Work:

1. Should not dilute the experience


 Should not interrupt users
 Should not irritate users with Spam

2. Must add value to the users


 Must be relevant
 Must be so compelling 95% of users would be okay with it
Multi Pronged Approach to Profitability:
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Step 1

Serve Contextual Ads

Proven Revenue Model (see Google)


Relevant to users and clearly marked as sponsored tweets to users
would avoid backlash

How it would work:

Twitter would analyze the data of the user. What he/she tweets
about, what the user’s network is tweeting about in order to develop
an advertiser profile of common keywords, themes, interests, topics,
likes /dislikes, etc.
User would be tweeted randomly as he/she mentions a relevant topic.
ddfdafdfadsAdvertisement Example:
Contextual

Tweeted
Message to
my network

Pumped to watch the Cleveland Cavs game tonight!

Instant tweet
back to my
network and
myself
@CavsFan. We have tickets still available for tonight! Come Join us relevant to my
www.Cavs.com message.
sponsored tweet
Contextual Advertisement Revenue Model
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Assume 2% Click Thru Rate on Tweets (Highly relevant tweets =
higher CTR)
Average cost per click of $2
Serve Sponsored tweets against 10% of daily 3 million tweets
300,000 sponsored tweets served per day
6,000 clicks per day
As daily tweets and user base grows, ads become the norm, and
frequency rate can slowly increase as well.

$12,000 in daily profit x 365 = 4.38 million in revenue in 2009


$15,840 in daily profit x 365 = 5.78 million in revenue in 2010
Assuming 10% annual growth rate for daily tweets w/ 2%
annual growth of ads served against daily tweets (cap at 20% total)

2009: 4.38 million 2013: 11.54 million 2018: 20.66 million


Contextual Advertising Potential Downfalls:
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1. Users stop using service because ads are implemented
 Small number of users will be vocal , but with strong growth rate
into mainstream, most users from here will not mind the ads because
they have only experienced service with contextual ads. (Ex. Facebook
Newsfeed initial uproar)

2. Spam
 Frequency cap on messages which only allows for 10% of all
messages to be tweeted back with a sponsored message at first. As #
of tweets per day grows and users become more accustomed to ads,
percentage of sponsored messages can increase leading to more
revenue in the future for service.

3. Ads are not relevant


 In Twitter’s best interests to serve relevant ads to users as they are
a CPC model ala Google Sponsored Results
Develop new advertising Format: The Q & A
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How it works:
Any time a user tweets a question a reply comes back from an
advertiser with an answer with an enticing offer / discount.
Benefits to Twitter:
Huge Potential for advertisers on a local and national level. Local
bars, restaurants will want to participate to entice the user just a mile
away who tweets a question about finding a restaurant for a date,
while national sponsors will want to participate to entice the people
who tweet “I’m heading to Phoenix next week? Where should I stay?”
to which a response comes from Hilton Hotels “We would love to
welcome you to Phoenix at the Hilton Hotel at 123 center street and
would even like to give you 10% off your nightly rate call
800.555.5555”
Why would users like it?
It is targeted, relevant, and instant to their needs that offers a
discount by acting now.
HyperLocal results: Takes local search to a new level. If I tweet a
question about finding a restaurant, I get a result back from an
Q and A Method in Action:
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Question asked
to my network
for help on a
great
restaurant for a
I’m looking for a new restaurant in NYC for a first
date. Ideas? date and…..

Instant relevant
answer back
from a sponsor
that offers me a
@user..We are here for you at Morton’s. Located great deal and is
at 123 Park, just 4 blocks from your house. Call us close to my
at 212.555.5555 for 15% off tonight! house.
Potential Downfalls to Q & A Advertising Services:
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Users are inundated with responses by multiple advertisers and cause
people to stop using the service.

Resolution:
Users are on an opt out strategy. Users are automatically opt in users
unless they choose one of the opt out options.
Frequency cap per category per user: A user asks a question and they
receive just 1 sponsored tweet back by that category’s sponsor of the
day.

Users are given a choice on frequency of sponsored responses:


Can receive sponsored tweets on all questions
Can Opt Out completely
Can receive only sponsored tweets to questions in specific categories
Example: restaurants
Can choose to receive multiple offers as well
Q & A Advertising Revenue Model:
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Assume 5% Click Thru Rate on Answer Tweets
$5 avg CPC
Higher Cost because of ads being extremely targeted and relevant to
users questions
Assume 25% of 3 million daily Tweets are Questions:
750,000 Possible Sponsored Answer Messages per day
Assume: Users Opt for 50% of Tweeted questions to receive 1
sponsored answer
Serve 375,000 Sponsored answer Tweets daily x 5% CTR = 18,750
Clicks Daily
As daily tweets and user base grows, ads become the norm, and
frequency rate can slowly increase as well.

18,750 x $5 = $93,500 per day = $34.22 million yearly


revenue (2009)
Q & A Advertising Method Growth Assumptions:
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 10% Growth Rate for daily tweets
 Assume flat 50% of questions per day receive sponsored answers.
 2 % YoY growth for # of questions tweeted (flat growth at 35%)
 Example: 2010 = 3.3 million tweets daily with 27% of tweets being
questions
2011 = 3.63 million daily tweets with 29% of tweets being
questions

2010: 3.3 million tweets x 27% =891,000 Questions x 50%=445,500 x


5% CTR= 22,275 daily clicks
40.65 million in 2010 revenue

2013 Revenue: 66.14 million

2018 Revenue: 112.96 million


Revenue Source # 3: Market Research
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Potential Revenue of $25 to $50 million per year (based up
Hoovers.com annual revenue of $50 to $100 million)

Leverage Data of Users to Companies


Monitor positive and negative mentions of companies
Data mine profiles and tweets for common likes / dislikes interests of users
Extremely targeted.

Market Research in Action:


Twitter sells a list of data with users info to a national pizza chain.
 Ex. Pizza Chain buys a lead list of consumers in Cincinnati, OH. Chain knows
the likes / dislikes of consumers within a 25 mile radius on Cincinnati. Knows how
often they tweet about Pizza, which days of week, what times of day, how often
they tweet about eating out, # of tweets related to their company and
competitors. Pizza Chain now can direct mail special offers to these consumers
and tailor their traditional media advertisements to focus on the hot buttons of
consumers in this area.

Pricing Varies depending detail / size of list.


Twitter Revenues Annually
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Contextual Ads: $ 4.38 million
Q & A ads: $ 34.22 million
Market Research: $ 25.0 million
2009 Total: $ 63.6 million

Contextual Ads: $ 11.54 million


Q & A ads: $ 66.14 million
Market Research: $ 25.0 million
2013 Total: $ 102.68 million

Contextual Ads: $ 20.66 million


Q & A ads: $ 112.96 million
Market Research: $ 25.0 million
2018 Total: $ 158.62 million
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Taking questions, comments, opinions at


mcalvey@gmail.com by Mike Calvey