It makes sense to compare the two companies. Both make money by learning their users’ interests and allowing advertisers to target those users accordingly. Both are social media tools. As of recently, both make use of hashtags.
But if both companies offered up exactly the same advertising opportunity, Facebook would be a clear choice. Facebook has 1.15 billion monthly active users compared to Twitter's rumored 240 million. Facebook also has more data about those users, who fill out detailed profiles about their interests, family members, and life stories.
Fortunately for Twitter, however, despite the two companies' similarities, the microblogging service can give advertisers some opportunities that are more difficult for Facebook to provide. Here's a look at some of Twitter areas of opportunity in the ad game:
Mobile. After Facebook went public, it had to translate its desktop advertising business to mobile. Twitter, by contrast, has been a perfect fit for mobile from the beginning. "It’s short-form," says Ken Doctor, who follows Twitter for research firm Outsell. "It’s not like so many other things that are long-form that are trying to adjust to mobile." From the beginning, Twitter has kept things short and in stream-form, and its advertising products have transferred from desktop to mobile without many changes.
Real-Time Conversation. One of Twitter’s biggest differentiators, from an advertising perspective, is its focus on real-time communication around events. Facebook has tried to foster the kind of conversation that happens on Twitter by borrowing features like trending topics, hashtags, and plans for algorithm updates that favor live commentary—but it’s Twitter that advertisers look to when the lights go out on the Super Bowl or their political opponent says something really stupid.
TV. Focusing on real-time interaction rather than "newspaper" synopsis also makes Twitter a great companion app to other media. The company helps television advertisers, for instance, serve promoted tweets to people who have recently seen their commercials by pinpointing users who are watching a particular show. It's not just TV that offers Twitter this type of advantage. "I would say, not just television, but even for sporting events, live, in-person sporting events, or live concerts, Twitter is that much more compatible," says Rick Heitzmann, managing director at FirstMark Capital.
It's not that Twitter somehow has a better business plan than Facebook. There are advertising formats within which Facebook excels, formats Twitter is unlikely to tap, such as:
Friendship-Driven Sales While Twitter is certainly social, users who follow each other don’t always know each other. Its graph is based more on users interests than their real-life social connections. While Facebook's promoted posts focus on relationships (i.e., "Your friend Jane loves this product"), Twitter’s promoted tweets are based on demographics and interests.
Display Advertising Part of Facebook’s revenue comes from the ads it runs alongside social content. "Twitter by contrast doesn’t have that opportunity," says Nate Elliott, an analyst with Forrester Research. "Most of their heavy users don’t ever show up on Twitter.com, they’re mostly accessing the Twitter feed and posting to Twitter through third-party applications."
What about an ad network?
I knew this was going to come up. Twitter purchased a company called MoPub earlier this month. Part of what MoPub does is help advertisers and publishers find each other (this is also known as an ad network). The acquisition puts Twitter in a position to sell ads not only in its own apps, but also across a network of apps.
"We are going to continue to invest and extend MoPub’s existing business, and that means selling ads in other apps on iOS and Android," Kevin Weil, Twitter’s vice product of product for revenue, told the New York Times. Weil also told the [iTimes[/i] that the company would work to develop new native ad formats for not just Twitter, but the mobile ecosystem.
But it could be a while before those ambitions efforts materialize. What Twitter needs most help with now is better automation for ad buying on its own site, another area of MoPub’s expertise. "For Twitter, this is kind of catch-up, but it’s also the price of admission in this new business," Doctor says.
Facebook ended its experiments with its own ad network before its IPO. Elliott doesn't see Facebook picking them up again anytime soon. "If you’re going to do a successful ad exchange or network, leveraging your data is the most important piece," he says. "Facebook has a lot more data. And a lot more users. That means that if they both pursued the same strategy, that Facebook would be more successful. But I don’t think Facebook is chasing in that direction, and it looks like Twitter is."
Lucky for Twitter, the same could be said for several aspects of its emerging advertising business.
[Image: Flickr user Marco Spaapen]