Twitter: Plenty of Users, Little Dough

The social media company has a revenue problem

   

twitter logo 200x100 Twitter: Plenty of Users, Little DoughWhile Twitter is a global phenomenon — with about 100 million monthly users — the social media company has one big problem: It can’t seem to make much money.

Based on analysis from eMarketer, the company posted about $140 million in revenues last year. Meanwhile, Facebook generated a whopping $3.15 billion during the same period.

Now, Twitter certainly is getting aggressive with its monetization efforts. Besides having sponsored tweets, the company has recently introduced “promoted trends” — which allows advertisers to pay $120,000 per day to be on a trending topic. Some of the other initiatives include self-serve ads for small businesses, as well as mobile marketing messages on Apple‘s (NASDAQ:AAPL) iPhone platform.

But according to a recent Wall Street Journal article, it looks like Twitter is having trouble getting much traction.

While ads may get clicked and retweeted, there is little evidence that they lead to sales. And despite Twitter’s size, the ad reach still seems small. After all, how many people really pay razor-sharp attention to much of their Twitter feeds, which often are full of noise?

Top brands like Starbucks (NASDAQ:SBUX), Nike (NYSE:NKE) and Proctor & Gamble (NYSE:PG), still see the value of Twitter. But they seem more interested in using it as a way to build a strong list of followers — which is free — leaving little reason to buy ads.

So Twitter appears to be in a tough spot. If it cannot find ways to boost revenues — and get to profitability — its current $8.4 billion valuation could come under lots of pressure. And it also could mean investors will continue to wait for a Twitter IPO to finally hit the market.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “The Complete M&A Handbook”, “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/twitter-plenty-of-users-little-dough/.

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