Twitter’s finances have long been a punching bag for its critics: Even as it struggled to generate revenue from its platform, the company held enough cash to fund its operations for more than 400 years.
No one really expected Twitter to live off its cash reserves and never make a serious effort at becoming a big moneymaker, but as Twitter revenue reports continued to underwhelm investors and industry experts, the running joke was that, hey, maybe Twitter really doesn’t care about turning a profit.
Now, nearly 12 years after it was founded, Twitter might have finally gotten the last laugh: The company revealed in its Q4 2017 earnings report that it turned an impressive $91 million profit at the end of last year, per USA Today, a stark improvement on its $167 million loss suffered the same quarter of the previous year.
It’s great news for a brand that has been mired in bad PR about its role in fake news and the scourge of Russian bots. And Twitter isn’t the only social network making huge strides: In the same quarter, Snapchat crushed analyst revenue projections, raking in $286 million in revenue when experts anticipated a modest $30 million. Meanwhile, the company claimed the addition of 9 million new active users, its biggest growth spurt since going public, according to Ad Age.
These positive strides come as social giant Facebook struggles with its own PR scandals and dipping engagement with its News Feed feature. As Facebook acknowledges its need to upgrade its user experience, Twitter and Snapchat are building momentum to close the (still sizable) gap between their own platforms and the industry leader. For marketers, the question is whether this upswing is making any tangible difference in the social media marketing opportunities available through Twitter and Snapchat.
It stands to reason that increased Snapchat and Twitter revenue reflects an influx of advertising dollars for the brands, but the long-term implications of this growth will hinge on whether that spending is generating strong ROI—and, ultimately, whether the performance is enough to coax marketers to shift dollars away from Facebook and toward its rivals.
What’s Behind This Sudden Surge?
The factors driving Twitter’s success are twofold. On the cosmetic side, changes to its user experience have been successful in driving daily and monthly user engagement. According to Reuters, the company’s decision to double its character limit was successful in attracting new users: The company saw a 12 percent increase after the changes went into effect. The company has also taken strides to remove spam and bot accounts, although many still remain and a workable solution has yet to be found.
I’m so proud of the @Twitter team. We did what we said we were going to do. Our focus and self-discipline continues to improve. Thank you team! And thanks to all of our shareholders for the patience and support. 2018 is going to be a great year.
— jack (@jack) February 8, 2018
Nonetheless, engagement on the platform is up. And advertisers have been able to take advantage thanks to the company’s overhaul of its ad targeting tools. Twitter has been using machine learning to improve its ad personalization, and this transition has improved click-through rates for its advertisers. Video ad sales are also on the rise. With a broader range of ad products and more efficient performance, marketers are starting to see better ROI from Twitter’s offerings.
Snapchat, on the other hand, increased ad purchases by simplifying its automation platform, making the process easier for marketers to use. The CMO for 4C, Snapchat’s ad automation vendor, told Ad Age that while some of this revenue growth was boosted by holiday advertising campaigns, the platform did see new brands making ad purchases for the first time.
Year-over-year, Snapchat saw a 29 percent increase in ad spending. It’s also notable that while the automated platform drove down prices compared to what direct deals would offer, the more competitive pricing was buoyed by an influx of new advertisers. Snapchat was able to broaden its revenue base while making its ad products more affordable for brands to purchase, which signals a positive outlook for its ability to capture a mainstream marketing audience.
Can Marketers Take Advantage?
Twitter and Snapchat have picked up steam in recent months as marketing platforms, but the true test of their strength will be whether they’re able to attract dollars away from Facebook. Many marketers have budgets allocated for experimental spending, but Twitter and Snapchat will have to prove that their ROI offerings can compete with Facebook, and are worthy of sustained investment.
According to CNBC, that opportunity to seize some of Facebook’s market share has arrived. One analyst argues that 15 to 20 percent of traditional social media marketing professionals are now experimenting with Twitter ads, even if they never tried the platform before. Some of these advertisers are also looking at Snapchat to better understand what marketing opportunities it offers. In the short term, Twitter and Snapchat are all but assured of raking in more revenue and shoring up their financial position relative to Facebook’s struggles.
Image attribution: Andrew Feinberg
But all of these brands are playing the long game. Facebook isn’t worried about a small dip in revenue if it figures out a way to reposition its product and boost its user engagement. And Twitter and Snapchat will blow their hard-earned momentum if they’re unable to translate this renewed interest into dedicated customers.
In the end, it all comes down to ROI. Do these platforms offer the right products and targeting tools to help marketers drive strong results? Are marketers able to create content that succeeds on these platforms? Twitter and Snapchat are very different in terms of the kinds of content that succeed on one versus the other, so success on one platform does not forecast success on the other. Marketers who decide to try either of these platforms will be under the gun to figure out successful strategies before a string of platform-specific failures discourages them and returns them to more familiar marketing platforms, i.e. Facebook.
Some of that is in the hands of marketers, but success is also largely dependent on having the right tools to succeed. Twitter and Snapchat have made deep investments into providing the tools their customers need. It remains to be seen whether marketers will find long-term value in these upgrades.
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Featured image attribution: Colin Rex
About the AuthorMore Content by Jonathan Crowl