Q4 earnings calls from Facebook and Twitter dominated the headlines of our favorite technology sites this week, and the business sections of some heavy hitters too. For years, analysts and pundits alike would question ad nauseam how these two social media giants would actually monetize, and 2013 was the year an answer formed. With both companies going public within the past two years, these calls answering shareholder questions offer an unprecedented glimpse into the companies monetization strategies. In Q3, both companies revealed that sponsored content was the major driver for revenue (with an at-the-time surprising percentage coming from mobile) and it looks like Q4 is no different. Here's a look at the two, and how we think they might grow their native ad strategies in the near future.
Facebook ended the year with a 55% increase in revenue over 2012, resulting in almost $2.6-billion – with the majority coming from mobile advertising. Funnily enough, on the earnings call, Mark Zuckerberg repeated a mantra we're warm to here at Polar: he wants to up the quality of advertising on the site, not the quantity. Another interesting comment: COO Sheryl Sandberg also noted they are testing an auto-play ad unit in Instagram.
This offers a clue into future plans. With Instagram, Messenger, and now Paper, Facebook is showing a distinct interest in quality standalone app experiences, thus diversifying the products on which they in-turn serve quality native advertising. Paper is currently touted as the best app Facebook has ever built. It's a brand new way of looking at all the content already in your Facebook feed, utilizing the content discovery mechanism of competing news aggregators like Flipboard. Facebook is perfecting the product first, ensuring the quality is there. Eventually, like Instagram, they will start experimenting with marquee brands to produce a sponsored content strategy which won't turn off dedicated users.
On Twitter's call, you see the other side of the coin. Revenue rose 116%! Though the company beat expectations when it came to earnings and revenues but alas the user base did not grow, which many feel is their key to success. Twitter is a confusing product for a first time user, explaining why we see such frantic changes to its website and app offerings as of late – they are desperate to hold on to users who try out the service yet don't stick around. Why? Those who use Twitter are engaged. Conversation view, the blue line which links tweets that are responding to one another led to a lower time on site but they claim increased engagement. Instead of endlessly scrolling through their timelines looking for parsed pieces of a conversation, users see it all up front and instead refresh to see new tweets come in.
The motivation may be to keep users near the top of their timeline, where better realtime sponsored tweets can be served. Constantly changing features might frustrate users in the short run, but keeping them top of page where an advertiser and brand can reach out in real-time will be advantageous to the social network's pocketbook.
Evolving their products to adopt native advertising strategy led to a prosperous year for Twitter and Facebook, something many thought impossible even 3 years ago. It's a safe bet the companies will continue to tweak their existing apps and produce new ones to better take advantage of this exciting new format.