Don’t Expect Twitter to Sweat Main Street Ad Sales

Twitter is gearing up for an initial public offering, the company tweeted yesterday. Because it filed under new JOBS Act rules providing for “secret IPOs,” it may be months before the world gets to see the social networking service’s books. (Or maybe not.) When Twitter does share financial data, it’s unlikely that small business will make up a large piece of the company’s sales.

“Looking at some of their competitors, there’s tremendous opportunity with the small business market,” says Clark Fredricksen, vice president at EMarketer, which estimates Twitter will near $1 billion in revenue next year. “I wouldn’t say they’re ignoring it, but at this point I wouldn’t say that small business has been the primary focus of their ad sales effort.”

Instead, Twitter has focused on attracting big brands with its ability to target ads to its users based on interests, location, and gender. One big opportunity is the $60 billion television advertising market, since a certain breed of plugged-in people watch TV with one eye on their Twitter feeds.

Still, Twitter hasn’t ignored the small business market entirely. Last year the company partnered with American Express to offer self-service advertising to 10,000 merchants. In April, Twitter opened the self-service feature to all U.S. businesses, allowing users to buy promoted tweets without talking to a salesperson.

Self-service ads “catapulted” sales growth at Google and Facebook, Fredricksen says. And there’s good reason to keep a hand in the small business advertising market: Local digital ad spending will top $38 billion in 2016, according to research published in November by BIA/Kelsey.

For the moment, small businesses have been more likely to use Twitter for free to burnish their brands and promote their wares. That doesn’t mean self-service ads lack utility, says Jeremy Kagan, chief executive officer of digital marketer Pricing Engine. “People on Twitter are always scanning, and they’re very willing to click through,” he says. That makes Twitter especially good for lead generation: “It’s not hard to press a button that says, ‘Please send me more information.’”

Before it's here, it's on the Bloomberg Terminal.