Buried within last week’s stellar Q2 2014 earnings report is a growing problem that Twitter needs to address.
While the majority of people who use Twitter log in to the platform through the web or mobile, about 14% of them use it through third party apps. That’s the percentage of people who never see any of Twitter’s ads, including Promoted Accounts, Promoted Tweets or Twitter Cards.
The Wall Street Journal explains:
These are the users who, for example, read tweets on digital-news app Flipboard, share photos on Twitter from Instagram, blast their location from Foursquare, or tweet stories from news sites. But they never open Twitter’s mobile app or log in to Twitter.com, so they don’t see Twitter’s ads.
Let’s not forget marketers who use sophisticated social media listening and publishing tools such as Radian6, Buddy Media, Sprinklr and Spredfast to perform their social media tasks for them. These third party tools listen to whats important on Twitter, so you don’t have to. However, Twitter’s ad revenue depends precisely on users viewing ads they didn’t actively choose to, which is why its a problem when they use apps to filter them out.
This number of non-revenue generating users is growing, which could is of concern to Twitter’s investors. Twitter counts these users in its monthly active user numbers. However, if this number grows, it could become a significantly large component of the user base that doesn’t contribute anything to the bottom line. Although Twitter had confidently stated that the number of third party app users was declining, that number has doubled since it went public.
Either Twitter will accept this percentage and focus on growing (and advertising to) its core user base, or it could eventually start cracking down on third party apps that use its platform. It has already started cutting off data to a few apps that use its API to publish Twitter user figures, and we could see it restricting that access to several others unless some sort of revenue sharing agreement is reached. WSJ reports on one example of such an arrangement:
There are some hints on how Twitter might wring some ad dollars from its third-party users. In late 2013, Flipboard started testing full-page ads for Twitter within its tile that flips through a user’s feed of stories pulled from his or her Twitter account.
The bottom line: We shouldn’t expect our third party applications to be free from Twitter’s revenue generating efforts for long.