Twitter's IPO Didn't Say Much About The Huge Bump In Revenues It's About To Get

Twitter via @JackJack Dorsey, co-founder of Twitter

When Twitter unveiled its finances in an S-1 disclosure with the SEC in the runup to its IPO, we were surprised that the company was unprofitable even though it is on course to do $500 million or more in revenue this year.

But Twitter has a surprise up its sleeve for those of you with a negative view of the company's prospects: The effects of at least eight new revenue streams that Twitter could grow over the next months and years that were hardly mentioned in the S-1.

They're worth at least $100 million, annually.

Twitter has staffed up massively - it has 2,000 employees - and is investing as it grows. It's also well-funded ($1.1 billion in venture capital, plus another $1 billion coming from the IPO), so growth is probably more important than profits right now.

If and when those profits arrive, here are the revenue streams that will be generating them.

Currently, Twitter has three main revenue drivers, Promoted Tweets, Promoted Accounts and Promoted Trends. If you use Twitter you've likely seen them - they're ads that sit at the top of your Twitter timeline or Trends list, and companies pay for them to be there.

SEC

Here are eight new ones coming down the pike that the IPO filing didn't have much to say about:

1. Self-serve ads in international markets: At the moment, small and medium sized business that want to advertise directly on Twitter can only do so in the U.S. Access to Twitter for international customers has not yet been rolled out.
   
2. Video ads on Vine: Twitter's 6-second video app, Vine, launched in 2013 but none of the "inventory" from the millions of videos it plays to people every week has been monetized - yet. It's obvious that in the future companies will be able to promote ads on Vine. (It's already on the way over at Facebook's Instagram video product.)
3. Big Data: In the first half of 2013, Twitter made $32 million in revenue from "data licensing." Basically, Twitter lets analytics companies have access to the firehouse of info coming from its user base. Twitter expects this revenue stream to grow in absolute dollars but to decline as a percentage of revenues. In the long run, however, Twitter's data could potentially become more interesting than its ad operations, as the applications for data are endless whereas the applications for promoted tweets are not. Here's one unusual use: Investment company Dataminr analyzes tweets for Wall Street and can give investors a five-minute head start on the mainstream media when big news breaks.
4. Mobile advertising outside the Twitter ecosystem: Twitter announced the impending acquisition of mobile ad company MoPub on Sept. 9, after it reported its revenues through Q2. The revenue run rate at MoPub is reportedly $100 million. The MoPub revenue has yet to hit Twitter's quarterly numbers. MoPub could potentially give Twitter the ability to run ads on other companies' mobile apps, using Twitter data as a targeting mechanism.
5. Real-time bidding on ads inside Twitter: Twitter's MoPub unit is also able to build an RTB marketplace inside Twitter, which would allow advertisers to bid on users as they arrive in the system.
6. TV Ad Targeting: Twitter launched its TV ad targeting product in May. It aims to enhance the value of TV advertising by simultaneously triggering chatter on Twitter about it. So the success of this product has yet to hit Twitter's quarterly numbers.
7. Amplify: Amplify is Twitter's current video ad product. It lets video media companies - like TV networks - add preroll ads from their sponsors to viral videos (sports highlights and such), and promote that in tweets. This was another product launched in May that has yet to fully hit Twitter's books. CBS is one client.
8. Custom Audiences: Twitter is developing a custom audience product, like Facebook's, which allows advertisers to run ads targeting lists of their own users, and compare them with control groups who didn't see the ads. The difference in sales that results from the two campaigns lets advertisers know how well their ads worked. We understand that Twitter's Custom Audience product is in beta testing right now.

Neither Twitter nor Facebook like being compared to each other. Yet one striking similarity between the two companies is how, after they filed their IPOs, they both began ramping up a bunch of new, revenue-bearing ad products.

Facebook's stock went from $17 to more than $50 in the process. Doubtless that's one comparison Twitter would like to see occur, also.