Peter Kafka

Recent Posts by Peter Kafka

Twitter Is Made for Mobile, but It Still Has a Mobile Ad Gap

dick costolo twitter michiganThe move to mobile has been a problem for traditional Web publishers, who usually make less ad money from users on phones and tablets than they do from users on PCs.

And when Facebook went public last year, mobile became a glaring issue, when investors focused on the fact that Mark Zuckerberg had no mobile revenue at all.

Twitter isn’t supposed to have a mobile problem, since the company has been designed for phones from the start. Recall that in the company’s early days, it was built specifically for text messages. And last year, when Facebook was flailing at mobile, Twitter CEO Dick Costolo made a point of telling people he was making real money from phones.

But it turns out that Twitter still has a mobile gap, just like everyone else: When people use Twitter on their phones, they generate less money for the company.

Twitter doesn’t spell out the size of its mobile gap, but it does talk about it in its S-1 document, filed yesterday. The big problem: Two of Twitter’s primary ad products — “Promoted Accounts” and “Promoted Trends” — don’t work very well on mobile phones because it’s hard for people to see them.

So that means that Twitter has “generated higher advertising revenue per timeline view on our desktop applications than on our mobile applications,” the company said.

And because 75 percent of Twitter users get to the service via a mobile device (at least some of the time), and because that number is likely to increase, the problem could become more acute: “To the extent that user engagement on mobile applications continues to increase faster than user engagement on our desktop applications, advertising revenue per timeline view may be adversely impacted even if total advertising revenue continues to increase.” (Correction: I previously reported that 65 percent of Twitter usage happens on mobile, which is incorrect. Twitter says it generates 65 percent of its ad revenue from mobile.)

The fact that Promoted Trends aren’t very useful on phones may be particularly problematic for Twitter, since those ads have been selling well, in part because they resemble traditional display ads that marketers are familiar with. Earlier this year, the company was selling individual Trend ads, which appear on the side of a desktop users’ timeline, for upward of $200,000 a day.

Twitter may be able to address some of this via new ad products that work better on phones. And changes to Twitter itself may help.

As my colleague Mike Isaac has reported, an upcoming makeover for Twitter’s iPhone software will put more focus on images and video, which could have obvious ad implications. If Twitter can figure out how to make its mobile “discover” section more usable, that would also help, since that’s where the company currently stashes Promoted Trend and Account ads.

But some parts of the mobile problem will be beyond Twitter’s control. The majority of the company’s user base — 77 percent in Q2 2013 — is outside the U.S. And in some of those markets, users can’t get access to Twitter goodies like video, because they’re on slow Web connections or crude phones or both.

That’s presumably one of the reasons Twitter’s international users only account for 25 percent of the company’s revenue, and why “advertising per timeline view” — Twitter’s new version of an ad metric — generates $2.17 in the U.S. and 30 cents everywhere else in the world.

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