Twitter's User growth the only concern in an otherwise robust earnings (Part 4 of 4)
Twitter’s advertising rates have seen strong growth in the past few quarters
In the previous article, we discussed how Twitter’s (TWTR) higher ad click through rates is helping it grow its revenue from online advertising. Here we will discuss another important parameter of online advertising, the CPM (Cost-per-impression) and CPC (Cost-per-clicks). Twitter’s advertising rates have seen strong growth over the past year due to low advertising inventory and better ROI for advertisers. As shown in the below chart, the CPM rates for Twitter was about seven times that of Facebook (FB) as of Q4 2013.
Twitter maintain low ad inventory for better user experience
During the conference call to announce earnings, Twitter’s management mentioned that the user experience is the most important factor for the company, and that it wants to serve high quality, relevant ads for its users. Twitter keeps its ad load or ad inventory low deliberately so as to avoid clutter and focus on good user experience. According to Resolution Media, an agency that handled clients such as that handles clients such as HP (HPQ) and Pepsi (PEP), “Impressions and, to a lesser extent, clicks cost significantly more on Twitter; this reflects simple supply and demand with Facebook offering far more ad inventory. Facebook enables marketers to tap into significantly more ad inventory in large part thanks to the network’s right rail desktop ad placements, whereas Twitter ad placements appear predominantly in the feed. Facebook’s right rail ad placements sell for much lower costs than the better performing newsfeed-based inventory, which tends to be predominantly mobile inventory.”
Better ROI for advertisers help Twitter higher ad rates
During the conference call, Twitter mentioned that for large brands like American Express (AXP) to GetTaxi, Twitter is now their number one customer acquisition channel. Brands like American Apparel (APP) use its Lead Gen Cards to get new customers to sign up. Twitter’s management also mentioned, “The customers they got from Twitter have an average order value of $90, which is about 15% higher than their normal average order value. So across the spectrum of advertisers from apps and SMBs, the large global brands, and we’re delivering ROI for our customers”.
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