Advertising executives and analysts don't think Twitter's sums add up
But among the take-aways for those who weren't in attendance back in November was the notion that Twitter values its logged-out audience - those who see tweets but are not counted as active users - at $2.50 to the company each year. By comparison, those Twitter users who are logged-in are worth $4 plus per year, he said.
At a time when Twitter's monthly active user growth is stalling, the company has been shouting louder of late about the value of its logged-out audience, which it pegs at around 500 million(this includes people who see tweets embedded in news articles, or visit brand websites that have a Twitter stream.) Meanwhile, independent data from research firm GlobalWebIndex published by Business Insider earlier this month found that 160 million people identify themselves as Twitter readers, but not Twitter users.
But is a logged-out user really worth almost two-thirds that of a registered user? Business Insider put that question to a number of executives across the ad industry to see if Twitter's math adds up.
'Fanciful'
Nate Elliott, vice president and principal analyst serving marketing professionals at Forrester, thinks the $2.50 number is way out: "The notion that a 'logged-out user' is worth two-thirds as much as an actual user seems pretty fanciful. Those logged-out users will interact with Twitter's content much less frequently and for much less time, and they'll contribute very little data. All of those factors make it significantly harder for Twitter to make money from them."
That said, Twitter is currently making its first attempts to monetize those users.Earlier this week Twitter announced plans to sell ads in other apps and websites, by syndicating promoted tweets, initially with Yahoo Japan and Flipboard.
But a senior digital executive at one of the world's biggest media buying agencies, who asked not to be named given his company's close relationship with Twitter, doesn't think this approach will pay dividends for Twitter.
"There is no mechanism I know of by which Twitter can sell this passive audience," he told us. "It certainly sells data, perhaps including data for its passive audience. But not advertising. Twitter's data sales are, I think, a small percentage of its total sales. Maybe 10%. That's only a guess."
He also thinks Costolo's method to come to his $2.50 number - which appears to be comparing selling logged-out Twitter ads on a CPM (cost per mille/1000) is "abstract."
"We do not buy Twitter on CPM and do not think of it in this way. For example, you might pay a fixed lump sum for a 'Promoted Trend' and take pot luck how many people see it or act on it. We would then calculate a 'cost per engagement.' We could calculate a CPM, but we do not," he said.
He added: "[Twitter] is now selling video inventory to advertisers, called 'Promoted Video.' We pay only when the user clicks on the video: This is a 'CPX' model, where 'X' stands for some sort of action. To value Twitter's passive audience is therefore, abstract. And to do so in CPM terms, yet more so."
The numbers that actually matter
Brian Wieser, senior analyst at Pivotal Research Group, told us that no advertiser budgets for Twitter on the basis of users and that any figure calculated around average revenue per users is "pretty divorced from the business."
"What matters more are metrics like revenue per advertiser (probably around $6,700 in the quarter, up from $6,300 in the year ago period) or number of advertisers (I'm estimating 65,000 vs. 35,000. This matters because Twitter is focused on increasing the spend from every marketer," Wieser said.
Alternatively, Wieser says you could look at Twitter's total share of digital advertising (1.06% of global ex-China digital advertising last year - up from 0.57% in 2013.)
But we were still intrigued: How did Twitter get to that $2.50, or almost 63% of a logged-in user number? Eric Franchi, co-founder of digital advertising company Undertone, provided us with a hypothetical, back of envelope calculation:
But even with that rough math to hand, Franchi said that on an advertising basis, an untargeted ad still would not command 63% of the value of a targeted one.
Jerry Daykin, global digital and client director at the Dentsu Aegis Network, is a little more bullish, saying the $2.50 number is not an unrealistic ambition (although even he admits it's hard to accurately quantify the exact value of a logged-out user.)
Where the bigger opportunity may lie is Twitter's native video product as there will be opportunities for pre-roll, post-roll, and text overlay ads, Daykin said: "As proportionally more of Twitter's off platform reach becomes video based they'll be able to flick a switch and instantly be able to monetize that scale, and they've shown an early interest in video pre roll through their Amplify event sponsorship product."
As Business Insider has stated before, it seems Twitter is doing itself a huge disservice by not shouting about its huge total audience more often: The majority of digital advertising bought and sold on the internet is not served to logged-in users, and an estimated $137.5 billion was spent on digital ads last year (although this figure also includes ads targeted at logged-in users on sites like Twitter and Facebook, too.)
However, Twitter may be over-egging the pudding slightly too soon, by saying that a user that is logged in, with all the rich data and content they provide, is worth only a third more to the service than some who passively reads the odd tweet.