A pilot to be rolled out in the US will see the introduction of bespoke promoted advertising tweets for individual users, if they have previously shown an interest in particular products or services.
Kevin Weil, Senior Director of Product for Revenue at the company says, “Users won’t see more ads on Twitter, but they may see better ones.“
Twitter will need to step carefully through privacy hoops however, to make sure its ad retargeting is lawful. Facebook has put in some hard legal yards on targeted advertising – Twitter may be able to piggyback on that work. Twitter is also making much of its endorsement by the privacy watchdog, Electronic Frontier Foundation, clearly seeking to legitimise this way of reaching out to users.
It’s a safe bet that the step-up in focused targeting has arisen as a result of conversations with the company’s bankers and other financial advisers. If the company’s impending IPO is to be a success, it needs to get savvy with monetising its offering – the trick is to do so without disenfranchising its loyal user base. Twitter users, especially those with large followings, are not ones to annoy with pesky adverts. It’s really important to get the balance right. It’s not unheard of for Twitter users to hijack well-intentioned corporate tweets (see the McDonald’s #McDStories hashtag-to-bashtag as an example of how things can go wrong). Twitter will surely be alive to the irony of the risk of being denigrated on its own platform.
The pre-IPO push towards advertising maturity is not without precedence. Facebook was advised to deep mine its mobile customer base (pre-IPO Facebook had no mobile advertising capability). Although, in the end it didn’t manage that pre-IPO and therefore its float wasn’t as successful as it might have otherwise been. Now though, Facebook has successfully (and arguably not distastefully) capitalized on that move.
It’s an interesting evolutionary message for technology companies. The offering may be fantastic, but unless the company can make money, the company is not perpetually sustainable. It was not altogether unsurprising that Twitter CEO Dick Costolo (@dickc) went on record recently with “We think of revenue like oxygen. Essential to life but not the first thing you think about in the morning.”
Mr. Costolo’s stance isn’t unusual for a technology company leader. But it’s clearly not the best way to please potential investors, who are more passionate about the return on their cash (i.e. they think about “oxygen”) than whether Twitter can do lots of cool things and just happens to make revenue almost as a by-product. Look what happened in 1999-2000 with the dot.com boom-bust. Only a handful of players got clever and are still around. Lessons learned are still fresh in investors’ minds. Ultimately Twitter’s bankers will be saying, “Cash is king, otherwise don’t bother with an IPO”.
It will be interesting to see the results of the pilot, and how its loyal customer base reacts to the ads. Twitter, like Google, relies heavily on its simplicity and clutter-free user experience, and risks attrition and bad press if it doesn’t get the experience right first time.
Timing is everything. Twitter is in pre-IPO mode, getting its financial house in order to attract serious investors. More focused ads bring in more cash, more cash equals greater revenues and longevity, greater revenues and profitability mean better returns for shareholders. Twitter will have studied the Facebook IPO and it seems is moving more quickly than Facebook to ensure it gets the best possible returns when it IPOs.