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How Twitter plans to sell ads against its 500m logged-out users

Twitter’s plan to monetise the millions of its non-logged in users is starting to take shape in the form of ads being served to audiences across the wider web and third party apps - a move engineered to shift attention from flagging user growth to the data targeting potential of the platform.

The social network has previously revealed its aim to monetise logged-out users and is now beginning to firm up those plans, which hinge on its ability to turn organic search into another stream of revenue. Buoyed by a Google deal, officially announced yesterday (6 February), to make tweets searchable, the business hopes to exploit a $1.3bn revenue opportunity by serving ads to the roughly 500 million unique users who do not sign in.

This is backed by the company pulling Promoted Tweet ads from user feeds on Twitter and its app to feeds in Flipboard and Yahoo Japan. It gives advertisers a chance to get their content in front of more eyeballs.

What’s new about these deals is that they will drive traffic to Twitter’s logged-out experience, an indicator of how the company now views those relationships.

Unleashing logged-out ads

Dick Costolo, chief executive of Twitter, suggested to analysts on the conference call for its fourth quarter earnings that engagement and not overloading users with ads would give the social network staying power. Embedded tweets, search and the ability to share tweets is spurring the logged-out audience and this constant stream of users should help boost subscribers and lift monthly active users over time.

The strategic shift comes as no surprise given the company’s struggles to offset slowing user growth. Despite sales almost doubling (97 per cent) year-on-year to $479.1m in the three months to December, user growth cooled in the quarter, rising 20 per cent to 288 million following a 23 per cent increase in the previous quarter.

"It’s important for me to highlight that we are first going to be very, very focused on delivering a delightful user experience. I talked in my prepared remarks a little bit about the fact that it will be a combination of algorithmic, algorithm-generated timelines and duration,” said Costolo.

“We want to really nail that down but once that’s nailed down we’re already planning steps to go on delivering that promoted Twitter ad unit into the logged-out experience.”

The emergence of Twitter ads in the logged-out experience dovetails with its wider play to show relevant, timely ads wherever there is Twitter content. By syndicating ads the same way it syndicates tweets, the business aims to woo marketers with reach that extends far beyond its owned mobile apps and websites.

Costolo added: “These ads leverage the same rich data and targeting that marketers have access to through Twitter today and ultimately the same measurement. Only now we’re bringing this advertising technology to the rest of the mobile ecosystem.”

Nate Elliott, principal analyst at Forrester Research, said the speed and extent to which Twitter is trying to monetise its users stems from its refusal to “seriously change or improve the user experience for the past nine years”.

“The good news is that Twitter continues to get better at making money from the users it has,” he added. That's no surprise; two years ago the company was doing almost nothing to monetise its user base, so those numbers were always likely to grow quickly. But it's telling that Twitter is now planning to reach outside its own site to serve ads on other properties. They realise there's only so much revenue to be generated from a stagnant user base, and that they need to look elsewhere."

Brands on Twitter

For many advertisers, Twitter’s slowing user growth has not detracted from its potential to become a premier brand-building channel. Both Mondelez and Nissan are seeing strong engagement from content on the site, particularly around video, along with earned media gains.

Matthew Williamson, marketing activation director at Mondelez, told The Drum that Twitter will play a key role in delivering video content as part of a £7m campaign for Cadbury next week (9 February).

“What really works for a brand like Cadbury is audio-visual content, which is increasingly consumed outside of traditional TV. The fact that Twitter is piloting a video platform is interesting and opens up great opportunities for [Cadbury]. We work closely with the Twitter, Facebook and Google through our global deals because we want to be at the forefront of those developments.”

Russell Taylor, chief marketing officer at Samsung Electronics UK and Ireland, said: “Twitter’s much anticipated video service is proof that consumers are demanding the ability to shoot and edit content on the go that can then be shared instantly online.

"The group messaging service introduced capitalises on the ever growing demand for instant communication, which we are seeing increasingly across our devices.”

Mobile is Twitter’s story not social

Twitter’s strength is in mobile where user growth is strong and upcoming changes could improve the value of the ads it serves to devices. Mobile accounted for 88 per cent of advertising revenue in the period, driven in part by mobile.

Online videos are the most desirable ad formats for online media owners because they command a higher advertising revenue than other types of marketing. This is reflected in the cost per engagement of ads on Twitter rising 10 per cent in the quarter, driven by the higher priced newer ad units - many of which would be video or mobile based.

Anthony Noto, chief financial officer at Twitter, told analysts on the same conference call that the company is trying to encourage advertisers to think more broadly about engagement on the network. It is this notion that is spurring the roll out of native mobile videos on Twitter in the hope it creates an entirely new dimension to trending topics and earned media for advertisers.

Noto added: “More broadly as we think about engagement, there are number of different way that we measure engagement. There is no one perfect way. When it comes to advertising it's going to be click-through rate and it’s actually different by each format.”

Twitter has a large global reach that isn’t accurately recognised and yet the incoming logged-out audience data provides a completely different view of the user potential of the business.