How Twitter Earned Its Mega-Valuation

Rebecca Greenfield
The Atlantic Wire

Twitter might not quite deserve its (very) big new $10 billion valuation, but it's spent the last year working (very) hard to grow up — and just in time for the inevitable and (very) good-looking public offering in 2013. Last year Twitter reportedly brought in $350 million, or about two and a half times more than it did in 2011, which is a pretty big leap for a company that spent six years not caring much about monetization. But in 2012, with an emphasis on the growing mobile market, Twitter beefed up its advertising strategy and aggression, signaling to potential investors that it may have learned the secrets to revenue success in social media at a more opportune time than Facebook did. And while those efforts probably don't add up to $10 billion, the wheels are in motion to achieve a successful IPO. Here's how Twitter got there.

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The Great Mobile Ad Push

Making Everyone an Advertiser

Twitter is pretty agressive about sending emails reminding users that anyone can advertise their handle to get even more friends. It would be pretty shameless for a regular to pay for followers. But someone who wants to promote their business through their personal account can do that. Twitter claims a lot of businesses appear to be doing just that, and there's a proven track record.

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Improving Ad Models

A year ago, Twitter was content to just let marketers buy its top trending topic for a million bucks on a big day. But in the last few months, Twitter has made several successful — and valuable — tweaks to its service to help advertisers reach the right audience. With this keyword update, for example, advertisers can pick words they don't want to advertise against. Twitter also introduced targeted ads so that users with certain interests saw the promotions they actually wanted to — a smart play for higher CPMs. Then, of course, there are the brand pages for those willing to pony up $25,000. And, to prove all of that is working, Twitter gave businesses new ways to track progress

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Taking Over the World

In June Twitter pledged it would expand — and sell itself — in over 50 countries, and it has done just that, adding services for users in the Middle East, UK, Ireland, Japan, Brazil, North Africa, Southeast Asia, and Latin America.

Going Public

As for the future, Twitter will release its advertising API this quarter, sources say. That should bring mass-market advertising to the platform because, as TechCrunch's Ingrid Lunden explains, it will allow "scaled-up campaigns across the social network, and it also opens the door to more sophisticated targeting and analytics tools in the process." 

It's still pretty crazy to think that Twitter is valued at $10 billion when it generates a lot less money than that. But unlike Facebook's catch-up strategy for monetizing to keep its investors happy, at least Twitter already has a mobile money-maker and an aggressive pace for revenue growth before it heads into its IPO, expected to approach the planning phases later this year .