Twitter hits 100 million users, but doubts remain over ad revenue

Growth is strong, but monetisation issues still plague the social network

September 9, 2011
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Social media site Twitter has announced that it has broken the 100 million user mark.

Although this is still a way off Facebook’s 750 million it’s massive progress since the first tweet was sent five years ago.

Since then Twitter has been a powerful tool in some major situations such as the Arab spring and the more recent UK riots, where it was threatened with being shut down.

Equally it has provided inane entertainment and unparalleled access to stars, be it a direct link to Charlie Sheen or breaking its own tweet records with news of Beyonce.

According to a Twitter blog more than half of the 100 milllion users “log in to Twitter each day to follow their interests”.

Of course for many, Twitter realises that the site doesn’t involve actively tweeting themselves, and apparently 40 percent of active users “simply sign in to listen to what’s happening in their world”.

One of the problems that has faced the site has been turning its success into actual cash, and as Reuters reported recently this could prevent the company going public.

“We want to be able to remain independent, grow the business the way we want to, and not be beholden to public markets until we feel like we want to be,” Twitter CEO Dick Costolo.

Essentially Twitter needs to start finding better ways to draw money from advertising before it thinks about an IPO.

According to Ovum analyst Eden Zoller there are doubts over how well the site is working as a business, despite increasing users by a hefty 82 percent from the start of the year with a further 26 million on the way by the end of 2011.

Zoller said: “Twitter reported more impressive growth this week but once again remained circumspect on exactly how well its fledging advertising business is performing.”

“Twitter also announced that it will be expanding its Promoted Tweets advertising model so that Twitter users will see promoted tweets from potentially any brand rather than just those companies they have selected to follow.”

However, it is widely considered that such promoted tweets could in fact serve to turn users away. So it is crucial that Twitter finds a way to please both users and financiers.

Zoller continued: “Chief executive Dick Costolo says the existing model is doing well but without hard figures to back this claim it is not that reassuring – ‘exceeding expectations’ is tired fudge used by too many companies.”

“Despite its strong growth trajectory Twitter is in a challenging position. Costolo does not want to float Twitter until he has built a robust advertising business, which is understandable, but there is mounting pressure for Twitter to go public.”

“But in order to buy time, keep shareholders happy and the advertising community prepped, Costolo needs be more transparent about how well the business model is performing rather than just quote stats, however good they may be.”






 

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