I had the pleasure of hearing VP of Product Revenue for Twitter Kevin Weil discuss Twitter’s monetization strategy at Ad Age Digital. His presentation gave me insight into the question that everyone wants to know: how much am I worth to Twitter?
By now, we all had a chance to look at Twitter’s historical revenue and metrics. We learned that in 2012, the company saw $316.9 million in revenue, with $269 million derived from ad services and the balance, $47.5 million, derived from licensing data to third parties.
With 500 million registered users, we could extrapolate an average revenue per user (ARPU) of 63 cents ($316.9 million/500 million users). However, that wouldn’t be accurate, as this number includes an estimated 20 million faux Twitter accounts. When we take this into consideration, our number would be closer to 480 million users.
Yet, 480 million doesn’t account for inactive accounts. We know from the S-1 that there were 218 million monthly active users (MAUs) and 100 million daily active users (DAUs). We could estimate that each user is worth $1.45 based on MAUs or $3.16 based on DAUs.
However, we are still missing valuable data regarding the true value of a user. We need to understand the percentage of users who click ads and make purchases. Twitter is full of users who use it for entertainment, but we want to know who is driving revenue.
According to the Twitter blog, “The average Twitter user follows five or more brands. Users who primarily access Twitter on mobile are 60 percent more likely to follow 11 or more brands. They are also 53 percent more likely to recall seeing an ad on Twitter than the average Twitter user.”
The blog post continues, stating advertisers should “create Tweets that align with what mobile users need: real-time information that helps them make decisions as they go about their daily lives. They may be shopping near your store, and a Tweet about your current promotion might get them in the door. They may be waiting in a line at your bank and looking for information that will make the transaction easier. Think about creating campaigns centered around useful information or special offers that someone can act on immediately.”
The bottom line is “as consumers continue to shift their time to mobile, a big opportunity arises for brands. Mobile is in our DNA at Twitter, which means our platform can connect your brand to users in real time, wherever they are. Because mobile ads on Twitter are part of the organic content experience, they create a particularly powerful vehicle for brands to create reach, build frequency and drive engagement.”
Your value to Twitter is tied to the likelihood that you use a mobile phone and have the tendency to make compulsive purchases. If you are using Twitter for entertainment, your value to Twitter is on the lower range (63 cents), as they can still extract value from your data whether you click the links and/or make a purchase. If you’re a power user, who is glued to your phone in search of deals, your value is probably on the higher range ($3.16).
Today, Weil reported that one recent study showed 10 percent of users who engaged with a certain brand’s ad converted to paid customers. Naturally, the more you engage, the higher the probability of conversion and hence the higher your value to Twitter.
Image credit: CC by Steve Garfield