Media Blogged

Twitter IPO should be welcomed by the ad industry

The long-awaited floatation of Twitter should be a positive step for the advertising industry.

With shareholders naturally taking keen interest in their revenues and profits, the focus will quickly be directed to what is currently Twitter's dominant revenue stream – advertising.

Currently we know what the site can do as a communications platform through non-paid-for tweets and re-tweets, but its advertising placements are yet to deliver the volume returns that we see across other outlets. This can make it difficult to rely on as a leading platform in your media plan, and as such it's often considered as a complimentary 'nice to have' rather than 'must-have' medium.

The current advertising formats suffice and they do engage if activated well, however the volumes of interaction and the price advertisers are willing to pay for that type of engagement is currently relatively low.

Making ads work harder

Hopefully a Twitter IPO will encourage more effort to make ads work harder. This may involve the creation of more appealing formats that encourage users to engage at volume, and as a result this will boost investment from advertisers. As an advertiser, we would expect more effort from Twitter to show how its advertising opportunities can deliver against a range of communications objectives.

The key to success is simply making Twitter advertising work for advertisers and its users. Although currently lossmaking, Twitter's position isn't too dissimilar to Facebook, which has transformed to a profit generating machine. Facebook managed this transition by developing a number of innovative formats. However, as Twitter follows suit it will need to tread carefully not to interrupt the essence of the product, which users love. One benefit Twitter has over Facebook is that it has already conquered mobile, with 60% of users logging on via mobile devices (Twitter data, 2013).

There is certainly scope for more innovative ideas that will attract advertisers especially utilising Twitter's trump card – an engaged audience. However, keeping users engaged is also its biggest challenge, though one I think a company hungry to prove its value can live up to. Twitter will need to be smarter with the opportunities and perhaps develop partnered products, as Facebook has done with their 'connect' and 'open graph'.

Tweet targeting

A solution that will benefit advertisers is the ability to tweet in relative privacy to targeted groups. The big flaw in Twitter at the moment is that as an advertiser you have to engage with everyone, however sometimes what you want to communicate simply isn't relevant to the general user.

Twitter will become more relevant if it integrates even further with other popular sites and services. For instance, imagine being channelled all the relevant tweets from bank customers experiencing great service, just as you are reviewing which bank to switch your current account to? This is an opportunity banks will be willing to communicate around, and hence a great opportunity for the right kind of advert.

Taking this further, Twitter could share its insight data in more detail with advertisers, and present detailed opportunities around trending topics or ideas being suggested. Advertisers can go from paying for insight that could influence New Product Development, then reach out to those who inadvertently contributed to making the product great and offering discounts for their original 'unconscious' involvement.

Advertising on Twitter has the potential to be revolutionised in the short-term future, finally making it must-have medium of choice.

Dino Myers Lamptey is head of strategy at the7stars

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