TWITTER AND THE NEW, UNCERTAIN WORLD OF DIGITAL ADVERTISING
Greetings to everyone enrolled in MKT 595,
This is my first blog post with regards to this course, but it is certainly not my first foray into the world of blogging. In the past I have created blogs that discussed comedy and music (I'd post the URLs but the information is so dated, I think it would only serve to embarrass me. Do you remember when Susan Boyle was a new thing? You do? Well kudos to you! Do you remember when The Big Bang Theory was funny? I don't!)
Anyway, to kick things off I figured I'd discuss something I'm incredibly curious about which is the effectiveness of advertising on Twitter or more specifically how Twitter generates revenue. My little brother was recently offered a job at the popular - newly public - tech firm in a sales position. He and his team would be charged with persuading companies to purchase promoted tweets that would be targeted at relevant Twitter users.
Twitter currently has around 645,750,000 users, with an average number of 58 million tweets per day. That means that the average person should be tweeting about 11 times each day. Unfortunately this is far from reality. In fact, about 40% of Twitter accounts (258,300,000) do not tweet anything at all. This does not necessarily mean that the accounts are dormant, but they very well could be.
Some other statistics I found quite interesting:
- About .5% of the Twitter users attract 50% of attention on the channel
- 71% of daily tweets attract no reaction
- 25% of Twitter users have 0 followers
- Approximately only 8% of Americans use Twitter
There are several other tidbits that you can find in the links below, but the point is that I am not able to reconcile that astronomical valuation of $18 billion that Twitter received when it went public in November. Apparently neither can Scott Galloway, professor at NYU's Stern School of Business. Last week at the Ad Age Digital Conference, Galloway claims that while Twitter is currently trading at $44 a share, it is much closer to $10 a share:
“We believe it’s vastly overvalued and that the love affair with Twitter is about to come to an end,” Galloway said, speaking on behalf of the L2 Think Tank. “If you look at the number of advertisers advertising on each platform, LinkedIn actually has more advertisers than Twitter.”
LinkedIn also has a more diverse revenue stream than Twitter, which is completely reliant on advertisers.
Galloway also predicted that, in the midst of the social media bonanza that is currently our Internet, businesses are going to give some sites the shaft, and Twitter will be among those. Only time will tell if Galloway is right, but even if he isn’t, press like this has been known to cause stocks to drop. And since he’s an MBA professor of Brand Strategy and Digital Marketing, so there’s probably something to what he says.
“Your clients are sort of done playing in traffic trying to spread their peanut butter across eight or nine different platforms. I think you’re going to see a consolidation like, ‘These are the two platforms we’re going to invest in, and everybody else is going to be left out in the cold,’” he said.
Galloway thinks that the platforms that businesses will invest in will be Facebook, YouTube and Instagram. Sad times for Twitter, Foursquare, Pinterest, Tumblr and the like.
(Via.)
It is important to remember that this is just the opinion of one man. Last week was not a good one for Facebook, Twitter, or LinkedIn (stock prices fell -5.4%, -8.8%, and -13% respectively). Galloway does make a solid point, the biggest dilemma firms face with their advertising budget is clear metrics indicating a return on their investment, namely which avenues to use and how to determine whether they have been effective. While Facebook advertising revenue last year was 127% that of Twitter's, Twitter's click rate was significantly higher than Facebook's, this according to a report generated by Resolution Media. Twitter also commanded a far more expensive cost per click.
I am still a little bit torn on what conclusions should be drawn from all of this information. Of course I advised my brother to do as much research as possible and follow his instincts, but is it really worth moving to another city for a one-year contract for a company that hands out far more questions than answers? I enjoy Twitter quite a bit. I definitely take advantage of corporate promotions, but I mainly use the channel to follow comedians and the news. The businesses that I do follow employ their own social media strategists so they really have little need to pay Twitter themselves. While a tweet like anything else put forth on the internet has the ability to live on forever, the greater likelihood is that it will get lost in a sea of words, meanderings, and musings.
I am curious to hear other's thoughts though, so please feel free to comment below. Do you think Twitter is an effective advertising strategy? Do you think the company is valued accurately? Do you use Twitter? What do you use it for? Thanks for stopping by!
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