Small Businesses Question Twitter’s Usefulness

Small Businesses Question Twitter’s Usefulness

Ad Targeting on the Messaging Service Receives Mixed Reviews

YOREE KOH and SARAH E. NEEDLEMAN

Nov. 6, 2013 5:50 p.m. ET

As it prepares to begin trading on Thursday, Twitter Inc. is hustling to attract, and retain, small businesses, a potentially lucrative source of advertising revenue. Justin Beegel, president of Infographic World Inc., spent $550 to advertise his 11-person New York data-visualization company on Twitter in September. But two weeks of “promoted tweets” offering a discount to targeted users generated only one response, from a user who didn’t become a customer. “I’m definitely done with the Twitter ads,” says Mr. Beegel.Other small-business owners have had better results. But analysts, advisers and Twitter executives themselves say that cultivating and reaching an audience on the short-message service can require more time and effort than many small-business owners feel they can afford.

“I would say a couple days or a couple weeks are not enough” time to learn how to use Twitter and measure results, says Richard Alfonsi, Twitter’s vice president of global online sales. “You have to think about planning for the long term.”

Small businesses are important for Twitter’s long-term health as well, as the company seeks to justify to investors aggressive revenue targets. Some analysts project that Twitter will double its revenue in the next two years. In the first nine months of this year, Twitter’s revenue more than doubled to $422 million, but its loss widened to about $134 million.

Small businesses are a challenge for all social media. “It’s really hard to get small businesses to use technological products,” Facebook Inc. FB -3.18% Chief Operating Officer Sheryl Sandberg told analysts last week.

But Facebook, which had a head start on Twitter, appears to be making more progress. It says 20 million small businesses have created free “brand pages” on its site, and roughly one million have paid for ads. By contrast, Twitter claims 4.5 million small-business accounts, fewer than one-fourth as many, and counts thousands of small-business advertisers. Facebook also offers advertisers a potential audience with roughly five times as many users.

Facebook’s targeted promoted posts are “the most effective opportunity out there for small-business owners” and “more effective than Twitter’s ad products,” says Kathleen Ray, co-founder of The Everzocial Group Inc., a Temecula, Calif., agency that advises about 125 small firms nationwide on social-media marketing.

Mr. Alfonsi says Twitter has only been trying in earnest to recruit small-business advertisers since April, when it gave all businesses full access to a self-serve advertising system that makes it easier for smaller firms to buy ads. It has since added several features such as more specific search targets and pre-scheduled tweets, and increased its outreach efforts to educate small-business owners.

“We’re just getting started there,” says Mr. Alfonsi. “We think it’s going to be a very important part of that (advertising) strategy, and it’s one that can be a really large driver of growth and opportunity.”

Twitter’s promoted tweets are advertisements that look like regular tweets and appear in front of targeted users in high-profile areas such as the top of search results. Twitter charges advertisers when users follow a promoted account or retweet, reply, favorite or click on promoted tweets.

Some small businesses report success. “It’s really powerful for a small business like us where with just a few clicks we can target Starbucks SBUX -2.54% customers,” says Jason Belkin, owner of the Hampton Coffee Co. in Water Mill, N.Y., on the eastern end of Long Island.

Mr. Belkin says his Twitter following has nearly doubled to 2,500 since he started spending a couple hundred dollars a month on Twitter last year. He uses a targeting feature that allows him to place ads in front of accounts in New York City that follow Starbucks and other local competitors.

But some who say Twitter has been helpful say the company needs to do a better job helping small businesses assess the value of their spending.

Promoted tweets on Twitter helped Rock/Creek Outfitters, a Chattanooga, Tenn., outdoor-clothing retailer, capture record sales during a campaign held a week before Black Friday last year, says marketing director Mark McKnight. But Mr. McKnight says it wasn’t easy to gauge the effectiveness of Rock Creek’s ads: He turned them on and off several times and used an analytical tool from Google Inc. GOOG -1.45% to measure traffic to Rock Creek’s website.

“One thing I constantly challenge them (Twitter) with is how do I quantify spend,” Mr. McKnight says. “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.”

Twitter’s Mr. Alfonsi acknowledges the information gap and says Twitter is working to make it easier for small businesses to see the results they’re getting from ads.

For now, though, people like Alex Gounares say they don’t want to invest the time needed to make Twitter effective. The founder and chief of Concurix Corp., a software-service provider in Kirkland, Wash., spent about $1,000 for a few days of promoted tweets in August.

Mr. Gounares says Twitter told him that users were clicking on or retweeting his ads. But he says he didn’t detect increased traffic to his website and says the firm gained only a handful of Twitter followers.

Mr. Gounares said he didn’t seek help from Twitter. “I don’t want to spend my time becoming a Twitter expert,” he says. “I want to focus on getting customers.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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