By Brian Womack
Twitter Inc., the microblogging service that plans an initial public offering, is outpacing its bigger competitors Facebook Inc. and Google Inc. in a crucial growth area: mobile advertising.
Ads on smartphones and tablets will make up more than half of Twitter’s ad revenue this year, according to EMarketer Inc. That puts it ahead of Facebook, which generated 41 percent of its ad revenue from mobile promotions in the latest quarter. Google, the largest search engine, is estimated to get slightly less than one quarter of its revenue this year from mobile ads, EMarketer said.
While Twitter makes up just a tiny slice of the $16.7 billion projected mobile-ad market this year, it has the advantage of concentrating on mobile from an earlier stage and from a smaller base. That may help assuage investor concerns going into the company’s IPO, as mobile has been an area that has bedeviled other Internet companies. Facebook and Google, which initially focused on online ads for personal computers, have more recently had to reshape their massive ad businesses as users spend more time on the Web via smartphones and tablets.
“Mobile is clearly for Twitter the critical piece,” said Justin Merickel, senior director of advertising solutions at Adobe Systems Inc., which has a business that helps clients advertise online. “You’ve seen them really take, I think, a forward view into how to work with advertisers in that arena. We’re excited about both the growth and the potential that we’ve seen in that business.”
Twitter announced last week that it had submitted paperwork to go public, without giving details. The company filed confidentially with the U.S. Securities and Exchange Commission.
The San Francisco-based company, which was founded in 2006 and boasts more than 200 million users, began building its mobile-ad business last year. It accelerated the push just last week, with its planned purchase of mobile-ad startup MoPub for about $350 million in stock, its biggest-ever acquisition. MoPub specializes in helping companies quickly match publishers with ads on mobile devices.
Twitter’s existing mobile-ad business may put it on firmer investor footing than when Facebook went public in May 2012 in the biggest technology IPO. While the world’s biggest social-networking service initially drew investor demand, its stock slipped below its $38 IPO price on the second day of trading and didn’t reach that level again until this July.
Investors were concerned Facebook would struggle to profit from its growing base of mobile users. The company hadn’t begun a drive into mobile ads until just a few months before its market debut.
Now mobile ads, which made up 30 percent of Facebook’s revenue in the first quarter, will soon account for more than half of advertising dollars. Brandon McCormick, a spokesman for Facebook, declined to comment.
Google, meanwhile, has risen to become the second-most valuable U.S. technology company, thanks largely to its leading position in search-based advertising on PCs. Yet mobile ads are seen by some as less effective, and therefore don’t command as high a price as ads on desktops and laptops.