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Chips, Beer, Tweets: Why TV Is Key To Twitter's Prospects

Nov 6, 2013
Originally published on November 6, 2013 5:45 pm

One thing Twitter has that other social networks don't: Users who talk about the world in real time. In practice, this largely means one thing. Millions of people use Twitter while they're watching TV.

Those people often use hashtags to let other fans find their tweets (#BreakingBad, #NFL). More importantly, from Twitter's perspective, this lets advertisers know which users are watching what.

"Twitter is now that public theater where people are yelling, booing, exclaiming, laughing, clapping," says Antonio Garcia-Martinez, who helped build Facebook's ad exchange and now works for a social-advertising company, Nanigans. Getting into that public theater is incredibly valuable for advertisers, he says.

In other words, Twitter could become the key ad space for what marketing people call "the second screen." The first screen — TV — is still a huge source of ad revenue. That's why Twitter wants to become as indispensable as chips and beer for watching TV.

That will let the company sell advertisers on the idea that being on TV is no longer enough — they also need to advertise to all the Twitter users who are talking about the show.

At least, that's part of the pitch the company's making in Thursday's IPO.

Investors will have to weigh that against a pretty obvious downside: Twitter has yet to turn a profit. That's partly because the company has spent millions of dollars in the past year buying up companies to help Twitter sell more ads.

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AUDIE CORNISH, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Audie Cornish at NPR West in Culver City, California.

MELISSA BLOCK, HOST:

And I'm Melissa Block in Washington.

Twitter goes public tomorrow. It will offer shares on the New York Stock Exchange. The initial price will be $26 a share. If all goes as planned, Twitter will be valued at more than $14 billion. That's even though it's never turned a profit. So what are investors buying when they buy Twitter stock? NPR's Zoe Chace of our Planet Money team explains.

ZOE CHACE, BYLINE: Twitter can be addictive.

SHAREEF JACKSON: My name is Shareef Jackson, and I have tweeted 65,981 times.

CHACE: Lives in Milwaukee, he's a data analyst for an orthodontist.

JACKSON: I tweet about 94 times a day. My last tweet was - yeah, Neil deGrasse Tyson is a funny dude - nine minutes ago.

CHACE: So Twitter hopes to eventually make a profit by feeding ads to people like Shareef. There are roughly 230 million Twitter users, sending bite-sized messages back and forth, which is not a huge amount in the social media world. Facebook has about a billion. But Twitter argues it can do something that Facebook can't. It's right there when Shareef sits down on Sunday night to watch "The Walking Dead."

JACKSON: So right before "The Walking Dead" comes on, I definitely make sure that I have, like, some chips, maybe a beer, you know, just to make sure I have no excuses to get up and miss this awesome show.

CHACE: Twitter is positioning itself so that it's as essential as potato chips and beer to the television watching experience. And it's done this by popularizing the hashtag. I'm sure you've seen it on every show. Watching football, #NFL. The hashtag allows advertisers to know exactly what you're doing right now.

JACKSON: Obviously, the TV is on. And then in front of me, I have two things. I have my tablet with Twitter up, displaying all the tweets from people that are tweeting under "The Walking Dead" hashtag, and then I also have my phone, which I use to tweet out my own messages using that hashtag.

CHACE: So let's be clear. You're using three screens.

JACKSON: Triple-screen action is what I believe in. So as the show starts, I immediately start tweeting.

(SOUNDBITE OF TV SHOW, "THE WALKING DEAD")

JACKSON: Run away, little girl. Carol's going to burn you alive, #thewalkingdead.

ANTONIO GARCIA-MARTINEZ: Yes. I mean, it sounds basic and ridiculous. And it's sort of that classic startup that you think would never work if you heard about it, and yet there it is.

CHACE: This is Antonio Garcia Martinez. He works in social advertising, helped build Facebook's ad exchange. He says advertisers have already bought TV ads on shows like "The Walking Dead." What Twitter offers is the chance to also be on the second screen.

GARCIA-MARTINEZ: The first screen, of course, being the TV that has typified, like, post-World War II American consumer life, and then now, the sort of add-on, which is a tablet or phone.

CHACE: By one count from Accenture, in just the last year, the percentage of people in places like Europe and the U.S., Brazil, who use a tablet while watching TV has quadrupled to 44 percent in just one year.

GARCIA-MARTINEZ: Twitter is now that public theater where people are yelling, booing, exclaiming, laughing, clapping, et cetera. Imagine you are the Netflix of the world, or imagine you are the person who used to spend $1 million or more on a Super Bowl ad. I mean, what wouldn't you pay to be in that theater as people are actually interacting and talking about potentially your product?

CHACE: Twitter and the networks make the sell together, saying to advertisers, you need to be in two, maybe three places at the same time. At least that's the pitch the company is making in tomorrow's IPO. Investors will have to weigh that against a pretty obvious downside. Twitter has yet to turn a profit.

One reason is they've spent so much money this past year investing, buying up companies to help them sell ads. Another challenge, Shareef Jackson, avid tweeter, points this out - when you're having a conversation with your friends, sometimes you don't want an advertiser busting in.

JACKSON: It's like the equivalent of, like, walking through New York and having people just try to sell you stuff on the street, sort of just like, I'm trying get somewhere. Like, leave me alone.

CHACE: Shareef also knows that if Twitter is going to have a future, he needs the advertisers too, #nothingsfree. The interruptions are actually paying for the conversation.

Zoe Chace, NPR News. Transcript provided by NPR, Copyright NPR.