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Twitter Entry 03

Twitter Entry 03

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Published by nicholas.m.carlson

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Published by: nicholas.m.carlson on Jan 29, 2009
Copyright:Attribution Non-commercial

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06/16/2009

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Context
Create algorithmsmake adsrelevant to thecontext of thematerial peoplealready viewEg. Google
Demographics
Chargeadvertisers totarget unique age,sex, andgeographicpopulationsEg. HowTelevision works
Content
Work with clientsto generatecontent that willindirectly addvalue
Eg. Selling abook, you giveaway a quote +link 
Memory
Only chargeclients, and onlytweet to users, insuch a way sothey only- See the ad once- See the adperiodically
Pillars of the Advertisement TargetingTime Sensitivity
Chargeadvertisers basedon when theywould like toadvertise.Eg. Movie Launch,Event planning,Buzz creating etc.
User-Controlled Selective-User, Twitter Revenue Model
Have twitter suggest 140 character ads to users, which users can easily tweet, to earn twitter bucks. Optionally, only transmit the ad, to selectedfollowers. The twitter bucks, can be paid out in cash, spent online, or donated to charity. Explicitly, Twitter charges advertisers, more than theypay for tweeted ads.The dynamics & economics of the user selecting which ads they tweet, as well as the frequency of ads, IS THE KEY!
 
Online Activity
Only advertise tousers who havebeen recentlyactiveEg. Users who just‘@’ repliedsomebody, is likelyactive.
If you tweet this…“Check out Howard Lindzon’s newbook, I think it’s greathttp://tinyurl.com/abcdefg
you will earn X twitter bucks.
Where X is a function of the-# of ads you tweet per day-# of tweets you twitter per day-# of followers you have, or the # of selected followers you have-time of day, day of the week-# of times the ad has been tweetedrecently-Other criteria defined for custom, largeclients
Positive Considerations
Users would monitor the advisement suggestions, indirectlythey would be getting advertised at!Twitter could set up a store, to sell merchandise, at a marked-up Twitter buck rate.Extremely scalable, and timeless, model
Negative Considerations
Bot users and spam followers would have to be controlled. Nosystem is perfect, there will be losses.Nobody can opt out of being advertised toThe name Twitter bucks is goofy. Needs a better name.
Other Considerations
Economic considerations would be necessary. The moreTwitter offers to pay users per ad, the higher the potential is thata user will tweet it. This creates a demand and supply basedmarket, where optimization would be necessarySome users would choose not to advertise to their followersSmart users will balance the number of ads they tweet, with thevalue they tweet, in order to preserve followers. It should be aself cleansing equilibrium, where people un-follow, those whoadvertise too much.
Five Likely FAQ
What if people don’t want tohand over personal info, inorder to tax?
Then, the money goes tocharity, like tipjoy does now. Itis hypothesized that only afraction of participating userscould support the model.
What if people don’tretweet?
Then, up the price of ads.
Who are likely advertisers?
Anybody with cash
What if people unfollowthose who advertise?
Then, the marginal benefit of a follower shifts, and thevalue of a follower does too.This can be solved witheconomic models.
People will be writingscripts and creating fakefollowers, what then?
Twitter will need to createstrict rules, and potentially areward system for tattle tales.
By J. N. McLarty, in an effort to save twitter, and just share $0.0833 ideas, I have millions of ‘em! @jmclarty
Concept:an applet abovethe “whatare you doing?” box presents…The Client to Cash Process
Client hasmessage theywant to publishon a certaindate, to acertainaudience.
  U s e r  t  w e e t s  t  h e  a d  t  h e y   w a n t, 
  w  h e n 
 t  h e y   w a n t  t o
The client pays for advertising credits, andthere account is drainedas algorithms matchads to users who…
 U s e r  t w e e t s  t h e  a d  t h e y  w a n t, 
 i f
  t h e y  w a n t  t o
User tweetsthe ad theywant,
because
 they want to
 
Client goes to a sectionon twitter.com, and fillsout a form based on thepillars (shown below)
 
Raised $20M, $80M Market Cap. With a PE at 30x, we need $2.6M in net income for 2009, bottom-line,nothing lower.
(Just stated, for frame of reference)
10 year timeframe, until growth rate is negative. For all calculations, assume end of twitter, in 10 years, with asudden death of -100% users.
(Conservative enough?)
*4.5M current usersAn estimated *5-10 thousand new accounts are opened per day. So, at 225K per month, and 4.5M currentusers, 60% per year for next 2 years is probably conservative. Assume a plateau in 2 years, at ~11M users.
(Really conservative)
*2.2% of users have more than *1100 followers, and these are the only people who ever advertise.
(Reallyconservative here, as BOTH of these numbers would climb faster than the growth rate of twitter)
On average, the algorithm, would work out to pay users $0.0005/follower they subject an ad to. So, $0.55 per ad they tweet.Advertisers are willing to pay $0.001/person that sees there ad.
(just an assumption).
So, twitter earns$0.55 per ad. User earns $0.55 per ad. For a total cost of $1.10 to the client per month. So, a little more than$1 buys a tweet from a user with 1100 followers.The advertising population (2.2% of 4.5M) would tweet 15 ads per month. .
(just an assumption).
 *35% of Twitter users have 10 or fewer followers, so probably won’t advertise, but can be advertised to.*9% of Twitter users follow no one at all, so can’t be advertised to, but might potentially advertise.
0510152025
   2   0   0   9   2   0  1  1   2   0  1   3   2   0  1   5   2   0  1   7   2   0  1   9
 Year 
   M   i   l   l   i  o  n  s   (   $  o  r   U  s  e  r  s   )
Conservative User ForecastRevenue generatedfrom only 2.2% of users
*Data taken from Q4 2008 HubSpot.com Report
Results:
2.2% of users couldgenerate $~9M in revenuefor FY 2009
Conservative Revenue Assumptions
 
1 Year forecast using a very conservative calculation was ~
$9M
.Upper bound on that, could be 1.5x to 3x that, if executed quickly.5 Year forecast, using the same conservative calculation is
~$23M.
Again, the actual number could be anywhere from 0.5x to3x that figure.It would be irresponsible to make a forecast, for this model, or for twitter’s revenue, 10 years out. But, since the contest requires it,steering away from the calculations used for 1 and 5 year (as allassumptions go out the window) I would say, using 2009 dollars,the range could be between $10M and $300M in revenue,
$80Mis most probable case.
There is so much uncertainty in the equations and model, thatanybody with revenue targets, even a year out, is just throwingdarts. No long term planning, should be decided, until better adpricing (both bid & ask) is determined.
1 Year, 5 Year, and 10 Year Revenue?

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