Can Twitter Rake in the Ads to Justify $1 Billion Valuation?

The question about Twitter used to be, "Is it a business?" Now, the question becomes "How big can it be?"

And the answer is: It better be big. CEO Evan Williams confirmed last week that the microblogging service had finalized its new funding, reported to be $100 million, giving Twitter -- which now has no monetization program in place -- a whopping $1 billion valuation. Prior investors Spark Capital, Benchmark Capital and Institutional Venture Partners doubled down, and late-stage investors T. Rowe Price and Insight Venture Partners joined up.

With the funding, Silicon Valley and the venture community are once again setting their sites on the marketing budgets of American business to support another free "cloud" web service, in this case 140-word bursts of text. Indeed, they're counting on the exponential growth of advertising revenue in a flat market for a company that -- while certainly useful to marketers -- has yet to earn its first dollar.

"I think they can build some kind of ad business, but the more relevant question is can they build an ad business worth a billion plus dollars," said Warren Lee, VC at Canaan Partners. "That would require tremendous volumes of impressions and reasonable conversions. Lots of execution will be needed. Not impossible but unlikely."

The cash infusion (on top of $55 million already raised and the estimated $25 million Twitter has left in the tank), puts the pressure on Twitter to earn its first $100 million within the next year or two, and sparked cries of "bubble!" from the cheap seats, but that was true of AOL, Netscape, Google and Facebook.

'No precedent'
Yet Twitter is quite different. "It's the first one that's not a destination -- it's a distributed service," said Seth Goldstein, CEO of SocialMedia and investor in early Twitter backer Union Square Ventures. "There is no precedent for how to monetize it. "

Like Facebook, businesses already use Twitter to communicate with their fans and don't need to pay Twitter a thing to build followers or communicate with them. "What we see is a move away from brands using broadcast media to more engagement media," said Zephrin Lasker, CEO of sales-lead exchange Pontiflex. "If you have engagement on a one-to-one basis, extremely scalable, that's valuable."

Valuable to marketers, but is it valuable to Twitter? With the money comes an expectation of corresponding revenue, and while verified accounts, corporate services and analytics are interesting, advertising is the business that scales. While co-founder Biz Stone said there are no plans to start an ad business this year, it seems inevitable Twitter will be going toe-to-toe with Facebook in the ad market.

"What is interesting from an advertising perspective is the same thing that is interesting about Facebook: It is one of the only platforms of scale that has two-way messaging potential," said Michael Lazerow, CEO of Buddy Media, which sells ads on Facebook widgets. "But are they a $50 mil or a $1 bil business?"

Twitter could turn on revenue immediately, but appears to be in no rush to do so. Observers have, for example, long wondered why Twitter didn't start running contextual or keyword ads next to tweets, like Google. Twitter could run the ads based on the content of tweets combined with what Twitter knows about the user from their profile and registration details.

Outside factors
The problem with that is that more and more users access Twitter from third-party apps like TweetDeck or Tweetie not owned by Twitter, and those services, too, need a business model and may also incorporate advertising.

Mr. Stone said that ads won't come before 2010 and Twitter's early-stage venture backers have told Ad Age the ad business, narrowly defined, isn't that interesting to them. On its site, Twitter touts marketing success stories from Pepsi, Jetblue and Dell, which consist of the brands using the service to connect with fans.

The cash could allow Twitter to make some acquisitions; perhaps one of the URL shorteners like Bit.ly, one or more of the Twitter applications, or one of the many, many firms now making dashboards to manage Twitter for corporate clients.

With a valuation of $1 billion, Twitter's investors believe one or more of the following outcomes are likely: an IPO or an acquisition at a healthy price. Already Twitter has reportedly turned down bids from Facebook, Google and Microsoft.

From Finance Chief, a Bill That May Weather the Blows

On the surface, it appears that no one is happy with Sen. Max Baucus (D-Mont.) -- and that may be the best news President Obama has haWithin minutes of the release of the Senate Finance Committee chairman's long-awaited health-care reform bill Wednesday, the attacks started flying. Liberal Democrats and allies, particularly labor unions, fumed. Republicans, after being courted for months, denounced the work as pure partisanship.

But behind the rhetorical fireworks was a sense that the fragile coalition of major industry leaders and interest groups central to refashioning the nation's $2.5 trillion health-care system remains intact. As they scoured the 223-page document, many of the most influential players found elements to dislike, but not necessarily reasons to kill the effort. Most enticing was the prospect of 30 million new customers.

At the White House, after the delays and drama of summer, strategists spoke finally of movement and a possible path toward success on the president's centerpiece domestic policy goal. To keep up the pressure, Obama met with three lawmakers who had warned they would not support the Baucus bill.

Sen. John D. Rockefeller IV (D-W.Va.), who is upset that Baucus did not include a public health insurance option, tempered his criticism after a private meeting with Obama, signaling that he hopes to work out a compromise.

"Nothing is clearer than the president's commitment to providing affordable and effective health care for all Americans, and he and I are united in our efforts to deliver on this promise," he said.

Lawmakers and lobbyists alike cautioned that Obama remains far from a White House signing ceremony and that perhaps the greatest danger at this point is death by a thousand legislative changes.
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The goal now is to keep the legislation moving toward a House and Senate conference committee, in which the administration would have its greatest influence on the outcome.

"He is open to a variety of different approaches if it gets it out of the Finance Committee," Sen. Ron Wyden (D-Ore.) said after talking to Obama. "He also knows he's got a lot of heavy lifting to do to get it out of the Finance Committee."

At the heart of the administration's strategy -- and Wednesday's guarded optimism -- is a collection of deals intended to neutralize the interest groups that helped defeat President Bill Clinton's health-care overhaul 15 years ago. In each instance, the industry has agreed to make financial concessions in return for new customers or other protections that could have lasting effects.

Hospitals, for example, have said they would accept about $155 billion in cuts over the next decade in return for promises that they would be exempt from actions taken by a proposed commission that would pursue additional savings in the Medicare program.

The best evidence that the approach was holding was the calm emanating from organizations that have criticized House health-care bills and a version approved by the Senate health committee.
d in months.

Twitter Strategies for Marketing Your Business

-“Brevity is the soul of wit,” wrote William Shakespeare. And it also appears to be the heart of the microblogging phenomenon, Twitter. Microblogging as a marketing strategy is bound to thrive, and sooner or later you’ll find it’s just smart business to communicate with your customers 140 characters at a time.
“Twitter is a great way to position yourself as an expert and go-to source in a particular field,” says Julio Ojeda-Zapata, author of Twitter Means Business: How Microblogging Can Help or Hurt Your Company. Ojeda-Zapata says people have found jobs, hired staff, promoted books, and been written about by major media outlets by blogging on the popular site. And while most business owners have heard of Twitter, relatively few are taking advantage of its power to promote their businesses.

The irony is that while blatant self-promotion and marketing on Twitter can be a recipe for failure, there are other uses that make it a back-end marketing and public relations bonanza. Here are three Twitter strategies every company should consider.

1. Search and respond: To see what your customers are saying about you, follow the advice of Tim O’Reilly, author of The Twitter Book, and search for your name, your company name, your Twitter name, and your brand or product. A few useful search engines include Twitter Search, TweetGrid, and Monitter.

2. Educate customers and be an expert: Natural Food Exchange in Reading, Massachusetts, is an independent, natural food store featuring the largest gluten-free stock of supplies in the state. Lisa Kalner Williams says the company uses Twitter as a way to distinguish it in the whole/natural food marketplace by tweeting useful information about celiac disease, a condition where a gluten-free diet has produced positive changes in those afflicted. Occasionally the company will do promotional tweets that mention gluten-free products available in the store.

3. Engage in conversations with customers: Of all the misconceptions that business owners have about Twitter, the biggest one is thinking of Twitter in terms of a monologue rather than a dialogue. “Old-school, one-way marketing is at best quaint and at worst annoying in this two-way world of social media,” according to Steve Mulder, director of emerging interactions at Molecular, part of Isobar, a global network of digital marketing companies.