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While Facebook struggles to prove to the world that it can deliver big revenue -- eMarketer estimates the world's largest social network will pull in $1bn less in revenue than previously anticipated -- one of social networking's largest still-privately-held companies, Twitter, is doing what it can to convince advertisers to increase their spend.
The company has several ad offerings, including Promoted Tweets, Promoted Accounts and Promoted Trends, and much to the chagrin of developers, has been making changes designed to ensure that it has the control over the Twitter ecosystem necessary to maximize monetization opportunities.
Yesterday, Twitter announced a potentially important new feature for its Promoted Tweets and Promoted Accounts products: interest-based targeting.
For obvious reasons, Twitter sees targeting as a crucial part of its growing advertising business. "By targeting people’s topical interests, you will be able to connect with a greater number of users and deliver tailored messages to people who are more likely to engage with your Tweets," according to Kevin Weil, Twitter's director of product management. "When people discover offers and messages about the things they care about on Twitter, it’s good for both marketers and users."
Twitter's new targeting options consists of 350 interest categories across two levels. Top-level categories include the usual suspects, like Movies and Television, Music and Radio, and Personal Finance, as well as some intriguing categories, such as Life Stages.
As part of the roll-out of interest targeting, Twitter also dropped the minimum bid price for Promoted product auctions to one cent. While that may lead some to believe that Twitter is struggling to move inventory, it's important to keep in mind that auction winners are determined by bid amount and engagement rate. According to Twitter's Weil, "We believe the new lower minimum bid, in combination with interest targeting, will drive greater ROI for every campaign on Twitter." And, in theory, greater overall revenue for Twitter.
Interest targeting will naturally be of interest to many advertisers using Twitter, but it's arguably not the most interesting part of Twitter's announcement yesterday. That distinction goes to a new feature that will effectively allow advertisers to segment their audiences:
If you want to target more precise sets of users, you can create custom segments by specifying certain @usernames that are relevant to the product, event or initiative you are looking to promote. Custom segments let you reach users with similar interests to that @username’s followers; they do not let you specifically target the followers of that @username. If you’re promoting your indie band’s next tour, you can create a custom audience by adding @usernames of related bands, thus targeting users with the same taste in music.
While it remains to be seen just how accurate Twitter's @username-based segmentation will be, it does create some interesting opportunities for advertisers. An advertiser looking to reach a competitor's followers, for instance, could try its luck adding the @username of its competitor.
Do targeting + segmentation = ROI in social?
Interest targeting and segmentation could be two big pieces to the ROI puzzle that Twitter is trying to figure out. Unlike Facebook, which chose to go public before it has the monetization nut fully cracked, Twitter has the luxury of taking its time and experimenting with solutions in a less public way.
But the question still remains: is it only a matter of time before companies like Facebook and Twitter find their versions of AdWords, or are there inherent limitations to what can be done in social channels -- regardless of how many tools Facebook and Twitter give advertisers?