Twitter Inc Revamps Ad-revenue Model Similar To Facebook Inc

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Twitter Inc Revamps Ad-revenue Model Similar To Facebook Inc

Twitter Inc (NYSE:TWTR) is modifying the methods it uses to charge advertisers with an objective to pitch more small businesses and challenge Facebook, according to a report from the Wall Street Journal. At present, the company earns revenue for every ad that a user clicks on his Twitter page.

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Advertisers to pay for specific action

In the coming month, the micro-blogging site is planning to offer ad companies complete say on how they want to spend their money. For instance, a retail store will agree to pay only when a user steers to its website to view the fall collection. Then there are options such as paying only after advertisers sees growth in its followers, app downloads or get user’s e-mail.

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The new charging methods are similar to the other social networks and self-service online ad platforms. Rival networking site, Facebook Inc. (NASDAQ:FB) allows advertisers to choose to pay on a specific action done by users such as app installs, clicks or likes.

Twitter mentioned that there are 4.5 million small business accounts and of which over thousands have already campaigned on Twitter. Rival Facebook noted that over 30 million small businesses have their brand pages on the site, and more than 1.5 million have advertised, as of June 30.

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Is this good for Twitter?

Following the new strategy, it will be more challenging for Twitter to earn advertising revenue as users will have to take extra steps to access the ads rather than simply pressing the favourite button or retweeting it.  It could pose a risk for Twitter, which vastly depends on money from advertising.

However, modifying the options would earn twitter more small and medium size businesses, a lucrative segment to tap on. These businesses are not in a position to spend a large amount on advertising, but want to be present on the popular media sites such as to pitch on potential customers.

Small and medium businesses are force to spend more in getting ad spaces due to increased competition, but once they get the deal, the overall cost would probably come down once they start generating more value from their ads. Craig Elbert, vice president of marketing for men’s’ clothing company Bonobos Inc, says that as an advertiser it is beneficial to pay only for the specific actions, and added “It’s an attractive option when you can quantify exactly what you’re getting.”

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com
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