As would-be investors wait for the much-hyped IPO of social media site Twitter, analysts are busily dissecting the platform’s prospects to see if it can make money for its shareholders and justify its valuation, which is expected to be more than $10 billion.
There’s reason to be optimistic. Over the past year, the company has continued to improve its self-service ad platform, including the addition of more targeting and reporting in the user interface. And following its September acquisition of the mobile ad exchange MoPub, one industry blogger called Twitter “the most interesting company in advertising right now.”
Data shows that 60% of marketers are using the platform to get their message to consumers, and another 18% plan to jump on the bandwagon next year. When you look at B2B marketers that number jumps to 85%, which represents more action than any other social media platform.
But usage alone is a poor metric for determining real value, and a public listing will put pressure on Twitter executives to make sure they are optimizing the company’s only real revenue channel. Unfortunately, a new report suggests they may have their work cut out for them.
A poll of 395 marketers in the United States, the UK and Canada conducted by Forrester Research finds that just over half of marketers report being satisfied with Twitter’s ad service, which places it just below Google Plus in terms of marketer satisfaction. Email, search and simple word of mouth all score better, and only Facebook scored lower, albeit only slightly.
One of the problems, according to Forrester analyst Nate Elliott, who helped write the report, is that marketers may be using the platform wrong, relying on it to build brand awareness instead of communicating with existing customers. But Elliott adds that because just 44% of marketers report satisfaction with Twitter as a marketing partner is proof that the company needs to provide more guidance, education, service and support.
“Twitter needs not only to develop additional marketing opportunities but also to provide tools, best practices and advice to help marketers get the most out of its platform,” he writes. The story gets even more bleak when you look outside the U.S. where three quarters of Twitter’s more than 230 million users reside, but just a quarter of its ad dollars are generated, according to a recent New York Times report. That’s up from last year, but still well below potential, according to industry experts. eMarketer estimates that Twitter will generate slightly more than $580 million in revenue this year, 0.5% of total worldwide digital ad spending, less than Amazon’s $660 million, and much less than Facebook’s whopping $6.4 billion estimated 2013 pull.
According to a report from Business Insider, while Twitter gets more overall impressions than Facebook, they cost more and generate half the revenue.
Yet despite all that, Forrester’s Elliot still thinks Twitter is “heading in the right direction.”
“[I]f it can help marketers build genuine connections with their customers, rather than just running ads, then Twitter could become the go-to site for the kind of social marketing that marketers are hungry for — the kind of social marketing we believe Facebook has left behind,” Elliot said.
If Twitter can pull it off, it would make the thousands of investors who will ultimately own a piece of the company happy, and potentially very rich.