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What the Twitter Profit Means for Social Advertising

What the Twitter Profit Means for Social Advertising

A few days ago, social media’s most polarising platform announced they’ve turned a profit for the first time in the company’s history. Here’s what happened.

Profitability took an impressive turn

In the final quarter of 2017, Twitter turned a profit of $91 million, a significant improvement over the $167 million loss they made a year earlier. News of the change pushed its shares up 12% to $30.18, which is the highest its been in over two years.

The Twitter team are overjoyed by their efforts, with CEO Jack Dorsey stating, “We returned to revenue growth, achieved our goal of GAAP profitability, increased our shipping cadence, and reached five consecutive quarters of double digit DAU growth. I'm proud of the steady progress we made in 2017, and confident in our path ahead,"

But user numbers are still flat

Even though profitability is on the rise, user numbers have remained fairly stagnant over the past couple of quarters. Which understandably leaves investors feeling uneasy about the future popularity of the platform.

However, Twitter was quick to point out that this past quarter was spent purging  both fake accounts bought by certain people to make them seem more influential, and the vicious cyber bullies who run rampant throughout the site. If that’s the case, perhaps user growth isn’t as bad as it first appears.

 

Social media platforms are evolving

Much like operation ‘delete fake accounts and hate-peddlers’, Twitter have also seen great success by altering their feed algorithm. Where posts previously appeared in chronological order from newest to oldest, they are now appearing in order or importance. This evolution has done wonders for engagement, evidenced by the number of people using the site daily increasing by 12% this quarter.

Rich Greenfield, a media and tech analyst at the research firm BTIG, commented on these numbers, saying, “If you show the right tweets to the right person at the right time, it creates user happiness,” Mr. Greenfield said. “That means more time spent on the site, which means more opportunities for advertising.”

Off the back of other social media giants like Facebook and Instagram making similar improvements – it seems like everyone wins. Users enjoy their experiences more deeply, advertisers are presented with further opportunities to be seen, and the platforms profit.

 

Where does that leave social media advertising?

On top of improvements to news feeds, the big social media platforms are putting in a concerted effort to make it easier for businesses to buy ads. They’re concentrating on more specific targeting, better return on investment, and easier sales execution.

Their primary focus remains strongly on user experience, so it’s inevitable that advertising costs will rise to compensate for fewer ad spots. But if the advertising updates continue to improve return on investment, a price hike will be easy to stomach.

Social media advertising

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