Twitter is known to keep things simple. When it comes its money making efforts, Twitter offers no banner ads, no ads animations, no ads between screens that users must click to get through.
Virtually, all of the company's revenue that is nearly $600 million this year in 2013, comes from three basic advertising formats that blend smoothly into its service, whether users are accessing it from a mobile phone or a web browser.
"What they have been able to do very well is develop products that meet the needs of most advertisers without being overly complex,” said Debra Aho Williamson, principal analyst for social media.
Twitter's aim for simplicity does have some drawbacks, especially when compared with other social networks, like Facebook, for instance. The company does not have strong demographic information about individual users, like gender and age, to allow it to sell highly targeted ads at expensive rates. And its marketing efforts have largely been oriented toward large advertisers in the United States, with few sales to smaller businesses and only about one-fifth of its ad revenue coming from overseas, Williamson said.
Twitter also makes additional revenue from selling the data in its raw feed of hundreds of millions of messages daily.
Twitter's Way of Advertising
Twitter uses a variety of ads effort for its revenue. The most common type of Twitter ad, especially on mobile devices, is the promoted tweet. Essentially, advertisers create a Twitter message, limited to 140 characters like any other message on the service, and pay to insert it into the flow of messages that a user sees.
The results resemble the ads that pop up at the top of the page after a Google web search, which also emphasizes simplicity in its ad business.
As with Google, Twitter's advertisers set key parameters like the target audience the ads should be reached. and how much they want to spend. Then Twitter will submit bids instantly to serve the ads to available slots.
Advertisers pay only when other users interacts the ad. These interactions are: retweeting, commenting and marking as favorite. However, these interactions only happen 1 to 3 percent of the time. To get that rate on the higher side, Twitter's system doesn't just automatically award an ad slot to the highest bidder; instead, it gives an advantage to ads that previous viewers have found to be more relevant or engaging.
Twitter has been known to be a phenomenal place when it comes to things going viral. Advertisers takes advantage of this by embeing photos and videos of their brand into their ads. The more users interact with the ad, the more viral the ad will become.
Twitter also have another ad formats that are even simpler: listing trending topics. The most popular 10 or so subjects being discussed at any given moment on the service, is well known as a window into society's obsessions. Advertisers can pay a flat fee to buy their way onto the list. The price for such a promoted trend, which is clearly labeled, varies by country, but runs about $200,000 for 24 hours of exposure to every Twitter user in the United States.
Twitter also allows companies or people that are seeking followers for their accounts to pay to make their accounts appear on the top of the list of new accounts to follow that Twitter suggests.
As Twitter prepares to sell stock to the public, the company is planning initiatives that will add complexity to its advertising business to increase its revenue stream.
Twitter announced that it had agreed to acquire MoPub, a company that acts as a middleman in placing ads from marketers inside mobile applications.
Chief Executive of MoPub, Jim Payne, said that the two companies shared a common DNA. Like MoPub, he said, Twitter "was designed to be mobile and it was designed to be real-time."
MoPub's technology is seen to be able to streamline Twitter's self-serve platform. It gives Twitter entree into the real-time bidding business, the ad network business and mobile app ads.
With its Amplify program, Twitter is also aggressively promoting joint ad sales with television channels.