As Twitter’s IPO debuts on the New York Stock Exchange, there’s no shortage of people questioning whether the company is profitable enough to justify a $26 stock price. One of the top concerns: Can Twitter convince small businesses to spend money on it?
The popularity of Twitter among small-business owners is unquestionable. Millions of business owners use the free service to send out tweets in order to engage customers or market themselves and earlier this year, the company reported that it had 4.5 million small-business accounts, according to The Wall Street Journal.
But getting business owners to actually spend their marketing dollars on Twitter is a whole other challenge. In Twitter's IPO filings last month, Twitter told investors that it’s expanding the amount of space it will devote to advertising—particularly “Promoted Tweets,” which are sponsored messages that get better exposure in users’ Twitter feeds. Businesses pay a small fee whenever someone clicks on the Promoted Tweet or gets a new follower from one.
The company also revealed in its filings that the number of ads it sold has risen in recent months, though the prices for those ads has fallen, according to the New York Times. Other social media sites like Facebook and Instagram have advantages when it comes to selling ads, because they can more easily offer display ads with photos or even videos.
So far, small-business owners have experienced mixed results using Twitter advertising, according to The Wall Street Journal. Justin Beegel, owner of Infographic World, a New York-based data-visualization company, spent $550 on Promoted Tweets. But he only got one response and was highly disappointed with the experience. “I'm definitely done with the Twitter ads," he says.
Other business owners have reported better results, but are still unsure whether Twitter ads provide enough benefit to justify the cost. One issue: It’s difficult to gauge the effectiveness of Promoted Tweets.
Mark McKnight, marketing director for Rock Creek Outfitters, a Chattanooga, Tennessee outdoor apparel retailer, says that he tested Promoted Tweets around Black Friday during last year's successful holiday-shopping season. However, it was difficult for him to determine whether the extra exposure was helping the store generate more business. He ended up turning on and off the Promoted Tweet and using Google Analytics to try and track the ad’s results.
"One thing I constantly challenge [Twitter] with is how do I quantify spend," Mr. McKnight told WSJ. "I look at it [Twitter] as a brand builder and an awareness builder so that by definition kind of makes it harder to tie it directly back to sales.”
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