I learned a lot of nuggets in my Ph.D. program. One of my mentors, professor Linda Price, often told us, “If you cannot explain your research to the cab driver in the car ride over to the conference, then your research idea is not clear, concise, or simple enough.” My entrepreneurs out there know this concept as the “30 second elevator pitch.” I talk about this concept in my class with the Key Word “Unique Selling Proposition” or USP.
To summarize, I feel Twitter has a problem because they cannot describe their revenue-generating model in 30 seconds or less. Each year, I take a deep-dive into something (2011 was blogging) and 2012 will be micro-blogging (meaning Twitter).
Check this article out (click here) I read the other day. The first nugget I got was the concept of a “Chief Revenue Officer” or CRO. That’s something new. Second, we learned Twitter now has 2,400 advertisers, up from 1,600 in the spring. Now that’s something clear and very easy to hang your hat on. However, that is where the clarity ends.
The article goes on to describe (only briefly), Twitter’s main advertising platforms.
“Twitter offers three types of ads: promoted accounts, promoted trends and promoted tweets, which appear in users’ content streams. These types of ads draw “massive engagement,” Bain said, with a conversion rate of about 3% to 5%. The rate for traditional display ads is around 0.5%. “The [return on investment] for marketers is insane,” Bain said, citing a handful of successful campaigns.”
While promoted accounts, promoted trends and promoted tweets are somewhat concrete, “massive engagement” and “insane ROI” is not. Remember when you were little and there was always that one kid on the playground who ALWAYS over exaggerated just to grab attention? That’s what Mr. Bain sounds like to me in this article.
In addition, while it seems natural to compare Twitter’s conversion percentage to banner ads (this is comparing apples to oranges), a better comparison would be to compare Twitter campaigns to Twitter campaigns. For instance, you can report an average conversion rate of about 3% to 5%, but if 1 of those campaigns had a conversion rate of 25% and the other 9 had a conversion rate of 0.50% (note to mathematicians out there: I am making the numbers up for illustrative purposes), can Twitter really claim they average a rate of 3% to 5%?
Now that Facebook has announced an IPO, the pressure will be on Twitter to do the same. Three years ago, we could have had a similar conversation about Facebook but not anymore with 4 billion in revenue last year. (However, I cannot wait to read their S1 to find out what their cost structure looks like on that 4 billion in revenue.)
I suggested a few weeks back (Click – Yahoo should buy Twitter and then merge with AOL) that Twitter should accept an offer from a “big brother.” This would take all the short-term pressure off of Twitter to build a solid revenue-generating model as opposed to a forced or hodge-podge revenue-generating model.
Something to think about today…