Twitter needs to change how it’s generating revenu

Facebook is making life harder for Twitter. The social network giant has that kind of targeting and reaches a large and growing audience. Now that brands can get both things on Facebook, which has 1.4 billion users, it’s a harder sell for rivals to offer just one or the other.
Advertisers certainly don’t seem thrilled about reach without engagement. Just look at Yahoo. The company said in its last annual report that it has more than 1 billion monthly active users. So it has Facebook-esque reach. But with little targeting, Yahoo can’t command premium pricing for its core display ad business.As Twitter tries to increase its reach, it’s making some revenue sacrifices. The company brokered ad syndication deals with Flipboard and Yahoo Japan that broaden the audience for “promoted tweets,” or ads that look like user posts. It also partnered with Google to make tweets show up more often in searches and to let advertisers buy Twitter ads through Google’s DoubleClick service. These deals cut into Twitter’s income, but the idea is that they’ll someday make that number go meaningfully higher.If Twitter had a billion users, lots of the anxiety about whether it’s a good platform for advertisers would dissipate. But after several quarters of smallish growth gains, people aren’t embracing the service in a big way.If the users won’t come, and I don’t think they will, it’s probably time to think about a way to be less dependent on selling ads. Twitter has a trove of data that it might be able to use in more imaginative ways.Other companies are already making money from tweets. Dataminr, for example, analyzes public information, including tweets, and sells the crunched data to government agencies, hedge funds and others.Twitter has lately been licensing less of its data to outside companies, ostensibly to keep the value of the information in house. But the company hasn’t talked much about how it sees its entire portfolio of assets, including the content generated by users, or talked about other ways it could make money off of those tweets.And that brings us back to Twitter’s options: get more people to use Twitter or find ways to make money that don’t depend on advertising. Otherwise, the stock will continue to fall.Summers said that a lower share price could create one positive outcome: Twitter could finally be affordable for an acquirer, giving some lucky company ownership of hundreds of millions of users who produce 500 million tweets a day.I tend to agree. Twitter looks shaky on its own, but solid as an acquisition – delivering some reach and a whole lot of targeting. In partnering with other companies, especially Google, Twitter even seems like it’s trying out for the role of acquisition target, showing how lucrative it can be to work with the company and access its user base. If Twitter can’t find money-making alternatives to selling ads, then that audition could come in handy.(Read Katie Benner’s full analysis at BloombergView.com