Tuesday, March 11, 2014

Twitter Is Going Public. Here's How It Makes Money. [Video]


Twitter Is Going Public. Here's How It Makes Money. As long anticipated, Twitter is going public. It almost goes without saying that the social network broke the news on Twitter. Its announcement came in five characters under the microblogging site's 140-character cutoff: The offering is expected to be the tech world's largest since Facebook went public in May 2012. Analysts valued Twitter at $10 billion earlier this year, and it may be worth a little more than that today. But as my colleague Matt Yglesias points out, the fact that it is filing confidentially implies that its annual revenues have not yet reached $1 billion.


Following the lead of Facebook and other Internet companies whose fortunes depend on an enormous user base, Twitter has been cautious about turning its service into a money-maker so far, with ads few and far between on the site. So how does it make money, and why might it be worth so much? Like Facebook, Twitter makes its money primarily by selling ads, which gain a lot of their value from the advertiser's ability to target specific groups of users. Twitter's disadvantage relative to Facebook is scale: It has on the order of 200 million users, while Facebook has some 1.15 billion. But its advantage lies in timeliness and topicality. People check Facebook casually, when time allows.

Twitter users tend to use Twitter quite actively, and in conjunction with specific events, like TV shows, rallies, concerts, and breaking news. So advertisers can craft ads tailored not only to a Twitter user's general tastes and demographic profile, but to what that user is doing at the very moment they see the ad. The fact that the company broke its own IPO news via Twitter—and saw the news retweeted by thousands of people within minutes—underscores the company's growing role as a global source of breaking news and instant analysis. It is in some ways the CNN of the Internet—the key difference being that it costs CNN an awful lot of money to produce its content, whereas Twitter gets it all for free from users. time since.

 

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