Commentary

Twitter's Problem Of More

Brands and companies struggle with scale. Each want to build campaigns that grow as fast or as slow as potential or existing customers are added. The Harvard Business Review describes challenges around scale as "the difficulty of spreading something good from those who have it to those that don't, or at least don't yet." The HBR calls it "the problem of more."

Microsoft Bing has been struggling to overcome the problem of more. It needs "more" people searching on the engine (and on Yahoo) before brands will sink more advertising dollars into search campaigns. Twitter also experiences a similar problem. It needs more scale before advertisers will latch on and spend more advertising dollars. The member base continues to grow, but not as fast or large as search engines AOL, Bing, Google, or Yahoo.

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"Average spend per full-service advertiser is relatively low, but undoubtedly has room to rise," writes Pivotal Research Group Analyst Brian Wieser in a published note after Twitter released its S1 filing. "Twitter may need more scale to succeed," he explains. "Twitter is not profitable, yet, but additional scale will undoubtedly drive the company into the black even as other cost pressures emerge."

That said, the Pew Internet & American Life Project reports the percentage of Internet users on Twitter more than doubled since November 2010, currently standing at 18% of all Internet users, with 18 through 29 year olds the most likely to use the site as of August. The percentage drop dramatically, 17%, for ages 30 to 49; 13%, ages 50 to 64, and 5%, 65 and older. 

On Thursday, marketers got a glimpse behind Twitter's financials when the company revealed its S1 filing as management prepares to take the company into the public market to trade on the stock exchange. Twitter's user growth continues to slow; and prices for advertisements, fall. The social network's revenue more than doubled to $254 million in the first six months of this year, but its net loss grew by 40% to $69 million.

Documents show Twitter, which chose TWTR as its ticker symbol, valued itself at about $9.7 billion, based on the number of shares outstanding, or at about $13 billion, including equity.

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