Is Twitter Finally About to Cash in on Advertising?

Twitter could finally see its recent moves into advertising and other promotional tools start to pay off this year, according to new estimates from eMarketer. The social network has had a somewhat conflicted relationship with the business side of the service for much of its life — at first, it didn’t really have time to work on things like advertising, because it was too busy trying to keep the platform from going down all the time. Once the network became more stable sometime last year, it started getting more serious about revenue, and the promotion of chief operating officer Dick Costolo to the CEO job several months ago has accelerated that. This year, eMarketer estimates the network’s ad revenue could top $150 million. If Twitter does hit that target, it would be more than triple what eMarketer estimates the company made from advertising last year.

Twitter has been offering two main advertising options for companies: one is Promoted Tweets, which allows firms like Disney to promote movies and other products by paying to have a tweet about them featured on the service — where it can then be re-tweeted or shared just like any other Twitter message. Companies can also pay to have what Twitter calls a Promoted Trend, which features their name or the product’s name in the spot that shows trending topics on the network. In both cases, Twitter says the tweets and topics will fade from view if they don’t get enough traction among users, based on a measure of relevance that the company has developed, which it calls “resonance.”

In October, the company launched a new promoted feature called Promoted Accounts, which allows companies to pay and have their official account promoted to new users (provided the account already fits the user’s interest profile). And all three of the promoted features are being extended beyond just the Twitter service, via partnerships with platforms such as HootSuite. At the time it launched Promoted Accounts, the company said that it was working with 40 advertisers, and that more than 80 percent had become repeat customers after trying out the service. Twitter also experimented with a discount offer called @EarlyBird, which was later shut down.

In its report, eMarketer didn’t say what it is basing its estimates on, but if Twitter does generate $150 million in advertising revenue this year, it will come close to beating MySpace, which was once the leading social network, but has since seen a dramatic decline in users and advertising. If eMarketer’s projections are correct, Twitter could pass MySpace next year to take second place in terms of social-network advertising market share, with $250 million in revenue. Facebook, of course, is still by far the leader: its revenues from advertising are estimated at close to $4 billion this year — accounting for about 65 percent of the total market — and as much as $5.7 billion next year.

Analyst Debra Aho Williams of eMarketer said that Twitter needs to “grow its user base and convince marketers of its value as a go-to secondary player to Facebook,” but it remains to be seen whether users of the service will take kindly to the intrusion of more advertising features into what is still primarily a social experience. If Twitter can generate the kind of revenues that eMarketer is predicting, it could help justify the almost $4-billion valuation that a recent financing round led by Kleiner Perkins gave the company.

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Thumbnail photo courtesy of Flickr user Rosauro Ochoa