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Twitter Said to Expect $1 Billion in Ad Revenue in 2014

By Jonathan Erlichman and Brian Womack
June 02, 2012 12:01 AM EDT 5 Comments
The Twitter Inc. website is displayed for a photograph in New York.
Photographer: Scott Eells/Bloomberg
The Twitter Inc. website is displayed for a photograph in New York.

Twitter Inc. expects to generate at least $1 billion in sales in 2014, two people with knowledge of the matter said, indicating that the blogging service will grow about twice as fast as some analysts now predict.

Twitter based the forecasts on expected advertising demand, said the people, who asked not to be identified because the numbers are private. The San Francisco-based company could change or miss the forecasts, the people said.

Demand for advertising aimed at Twitter’s more than 140 million users is benefiting the company. Researchers at EMarketer Inc. have said that in 2014, Twitter will reach $540 million in ad sales, which make up virtually all of its revenue, up from $139.5 million last year. Even so, it will take Twitter longer to generate $1 billion than bigger competitors Facebook Inc. (FB) and Google Inc. (GOOG)

“The marketers who have used Twitter’s advertising opportunities have been pleased,” said Nate Elliott, an analyst with Forrester Research Inc. (FORR) in New York. “Twitter’s going to be able to push forward and continue to make more money from it.”

Google crossed the $1 billion threshold five years after its founding, while Facebook, which sold shares in an initial public offering last month, achieved that goal six years after it got started. Founded in 2006, Twitter will be eight years old in 2014.

Overseas Expansion

Twitter has stepped up a campaign to induce marketers to devote more of their ad budgets to its service, which lets users post messages of no more than 140 characters to followers. Twitter, which unveiled its first ad offering in 2010, started a self-service platform this year to reach more small businesses. It also recently expanded mobile-ad services.

Companies need to spend money on Twitter to ensure their messages are seen, said Jeremiah Owyang, an analyst at San Mateo, California-based Altimeter Group. “Because all of the brands are jumping in and spewing content, there’s a deafening noise. So, the one way to cut across that is to advertise and make your content shine higher.”

Under Chief Executive Officer Dick Costolo, Twitter is also working to expand internationally, including in Japan, to lessen its reliance on the U.S. market. The percentage of revenue Twitter earns from the U.S. will fall to 83 percent in 2014 from about 90 percent this year, researcher EMarketer estimated in January.

Management Stability

He is also aiming to bring stability to management after a series of shifts at the top. Costolo was promoted to CEO in 2010, taking over for Evan Williams, a co-founder. The next year, another co-founder, Jack Dorsey, became executive chairman of the company and head of product development.

Dorsey, who had been replaced as CEO by Williams in 2008, splits his time between Twitter and his duties as CEO of Square Inc., the mobile-payments provider he co-founded in 2009.

While the company’s ad service may be improving, EMarketer in September reduced its estimates for revenue because of slowness in rolling out the self-serve ad platform that was announced earlier this year. EMarketer had earlier predicted revenue of $150 million instead of $139.5 million.

Gabriel Stricker, a spokesman for Twitter, declined to comment.

To contact the reporters on this story: Jonathan Erlichman in New York at jerlichman1@bloomberg.net; Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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