Finding a way to monetise a service that thrives on free and unlimited interactions presents some pesky obstacles. Users of social networks mostly resent any form of advertising, especially when it takes the form of other members' activity - sponsored tweets and trends for example. Twitter, Facebook and other social sites have, however, predictably implemented advertising in a big way over the past few years.
However, with an exponential increase in mobile social network users, the focus has greatly shifted over to this demographic. Given the smaller screen space available, Twitter have found it difficult to find a solution to the problem, but through the introduction of sponsored tweets and trends, revenues have soared. The company has seen a big impact by introducing mobile advertising, which in itself accounts for more than half of its total ad revenue.
Whilst Twitter, as a private company, doesn't disclose its full financial performance, estimates from eMarketer and other analytics firms show that Twitter's revenue of $288 million in 2012 is likely to more than double to $582.8 million in 2013. Most notably, eMarketer expects that figure to almost double again in 2014 to $950 million, roughly 18% greater than the same forecast made in September last year.
Executives in the San Francisco-based company haven't yet confirmed Twitter is heading towards an IPO, however those familiar with the company's business plan have suggested this is the most likely outcome in the coming months. It goes without saying the company hope to have a more successful initial offering than their Palo Alto-based rivals Facebook whose IPO landed them with falling share prices and reduced investor interest. Nevertheless, should the advertising revenue targets as set out by eMarketer be met, the cash will come flooding in.
With regards to the validity of these forecasts, estimates of Facebook's initial revenue made by eMarketer were close to the true revenue. The firm also accurately predicted Apple's Q4 revenue results, arguably causing a stir amongst shareholders before the figures were officially revealed.
Source: Wall Street Journal | Image: DigitalTrends