Twitter under pressure to squeeze big bucks from its users

Social networking and “microblogging” site Twitter is set to step up its efforts to squeeze more money out of its massive user base. Unlike Facebook which reportedly makes billions in revenue from the ads displayed on its pages, Twitter expects to make only an estimated $100 million in revenues from its “Promoted Trends” product which has sponsored topics appearing alongside natural trending topics and its new “Promoted Tweets” which will be inserted into the “Timeline” section of the Twitter page itself. The Timeline section is where users’ updates from other users they follow appear and is the central area of focus of the site.

Twitter has been seen to be a mobilising force in cyberspace as users acting in large numbers have at one time or another managed to mount strong public outcries against various social issues simply by inundating the “twitterverse” with their 140-character views on various matters. Unfortunately, Twitter’s own attempts to make money from its intangibly valuable technology had itself been a victim of these mass digital protests in the past…

The #Dickbar controversy and fail occurred when Twitter integrated a prominently displayed promotion in the timeline on the Twitter iPhone app, which resulted in a hashtag uproar forcing Twitter to take the feature off of the app.

Twitter management remains determined to squeeze more dollars out of its wildly popular technology and is set to continue to attempt to introduce in-stream ads to its site. The question is, how tolerant will users be to these changes?

Despite all of how social media is drummed up as mankind’s next big entertainment platform, the reality is that Old Media (television and radio) remains far more efficient at converting eyeballs into revenue…

On a per audience-minute basis Old Media revenue utterly dwarfs “New Media” revenue.

Facebook currently boasts a user base of 500 million. Being a privately-held company, however, it is mum on its revenue figures. So let us go by the estimated one billion dollars it may have made in 2009. Assume too that the average Facebook user was logged on an average one hour per day. That translates to about 0.009 cents in revenue per audience-minute.

Compare that to the American media network Fox’s Super Bowl franchise which is among the most-viewed content in Old Media. The 3rd February 2008 broadcast of Super Bowl XLII (New York Giants vs. New England Patriots) attracted an estimated 50 million viewers. A thirty-second advertising slot in a Super Bowl broadcast on the average costs about $2 million. That’s about 8 cents in revenue per audience-minute.

In short, compare:

New Media: Facebook requires an audience of 500 million to make 0.009 cents in advertising revenue per minute of air time.

Old Media: Fox requires an audience of 50 million to make 8 solid cents of advertising revenue per minute of air time.

Thus:

Old Media requires only a tenth of the audience to make 1000 times the revenue of New Media.

As one would have learned by now from the inglorious fall of MySpace, users can be happy campers on the latest trendy social networking site one moment and then, on another, be leaving in droves. MySpace at the height of its popularity was, itself, under pressure to squeeze more and more dollars out of its vast user base, the largest in the social networking scene…

While developers at Facebook, Tumblr, and Twitter—startups backed by venture capital—were more free to design their products without the immediate pressure of advertising goals, Myspace managers had to hit quarterly revenue targets. That pressure increased dramatically in the summer of 2006, when Google paid $300 million a year for three years to be the exclusive search-engine provider on Myspace on the condition that the social network hit a series of escalating traffic numbers.

In retrospect, DeWolfe says, the imperative to monetize the site stunted its evolution: “When we did the Google deal, we basically doubled the ads on our site,” making it more cluttered. The size, quality, and placement of ads became another source of tension with News Corp., according to DeWolfe and another executive. “Remember the rotten teeth ad?” DeWolfe says. “And the weight-loss ads that would show a stomach bulging over a pair of pants?”

Such are the risks of antagonising one’s user base, no matter how much of a cult status your brand holds. Indeed, the Web is never lacking in little players running circles around the giant of the moment. It was the same for MySpace back in the mid- to late-00’s…

In the meantime a group of new, specialized social media companies began targeting Myspace customers. Tumblr offered an eloquent environment for self-expression. Twitter introduced a more efficient way of broadcasting ruminations to strangers. “Myspace had the right idea, where a band would have 900,000 friends,” says Kent Lindstrom, the former CEO of Friendster. “That’s what became Twitter. Myspace spent all their time working on tools around that, like media players, playlists, video. It turned out you didn’t really need all of that.”

Mark Zuckerberg’s Facebook, meanwhile, introduced more sophisticated tools for communicating with users’ real-life friends, through a clean, ad-free interface. “Facebook did a fantastic job of hiding behind the panic around Myspace and basically saying, ‘We’re totally safe,’ ” says Boyd.

Perhaps it would be interesting to start speculating on what a possible post-Twitter world would look like. What is the next big thing? It is never too early to speculate. Who would’ve known back in 2006 that über-trendy MySpace would be a goner within less than two years?

benign0

benign0 is the Webmaster of GetRealPhilippines.com.