Weekly Update

Why Twitter might be the next big success in mobile advertising

The worldwide mobile advertising market is a two-horse race, according to fresh data from eMarketer. Google will continue to dominate in 2014 with 46.8 percent of the market, the researcher predicted, but Facebook will claim an impressive 21.7 percent of the market, quadrupling the 5.4 percent it owned in 2012. And none of the also-rans will pose a threat to those two this year, eMarketer predicts: Twitter will finish a very distant third with 2.6 percent of the market in 2014, up just a notch from 2.4 percent in 2013, and just ahead of fellow also-rans Pandora (1.7 percent in 2014), YP.com (1.6 percent) and Millennial Media (.7 percent).

Mobile accounted for 53 percent of all Facebook’s ad revenues in the latest quarter, racking up a cool $1.37 billion, and that growth has primarily been driven by the “app install ads” the company launched 18 months ago. The massive social network appears to be building on that success with ads designed to encourage consumers to re-engage with apps they’ve already downloaded and stopped using. Google has taken a page from Facebook’s playbook and is toying with links that lead users inside an app, and Yahoo is also testing app-install ads.

Twitter is putting the pieces in place

Twitter boasts roughly 200 million users, 75 percent of whom access the service via mobile at least some of the time. But as Peter Kafka of All Things D pointed out last October, the company has struggled mightily to monetize what should be its bread and butter because its ads are often too small to be effective on mobile phone screens.

But Twitter has made a few moves in recent months that should help:

  • Last week it introduced a new platform enabling smartphone users to view video clips within their feeds with just a single click. The NBA has already used the platform to promote games while they’re still occurring, and Twitter plans to offer the technology to dozens of others to boost revenues from mobile video ads.
  • It recently began testing a “click-to-call” button that allows users to, yes, call an advertiser with a single click. While this isn’t exactly a cutting-edge feature – click-to-call has been used by mobile search providers for years – it provides a simple, powerful way to bring advertisers and consumers together, and it is extremely effective at helping marketers determine the ROI of their mobile campaigns.
  • Twitter announced the global rollout of Tailored Audiences, which helps advertisers reach specific audience segments based on first-party data as well as information from third parties. Tailored Audiences uses cookie information to track users who are logged in to their Twitter accounts on their PCs, then identifies those users on their phones to send targeted mobile ads.
  • In late October Twitter closed its $350 million acquisition of MoPub, an ad network that uses real-time bidding and helps track users’ interests and behaviors in order to send more targeted ads. MoPub launched a native ad platform in December, giving Twitter the opportunity to monetize ads outside its own app. We have yet to see the acquisition have any real impact on Twitter’s bottom line, but I think the move will enable the company to leverage vast amounts of data to deliver highly targeted – and therefore highly lucrative – ads.

Twitter has other major challenges in mobile advertising, of course. The majority of its audience is overseas, where slower networks and less sophisticated phones may prevent users from accessing mobile video or other ads with rich media. It continues to struggle with mobile ad rates that have fallen consistently over the last eight quarters. And its audience remains just a fraction of Facebook’s.

But Facebook has made dramatic gains in mobile advertising over the last two years, illustrating that the market is still wide open. And the market will continue to grow rapidly over at least the next several years as technologies evolve and as analytics help advertisers deliver the right ad to the right users at the right time. If Twitter can execute, it can make big strides in a booming market over the next few years.