Ad invasion of Twitter just beginning

Research firm predicts advertising revenue for microblogging service to triple this year

Microblogging service Twitter, which is ambitiously trying to grow revenue, is expected by Internet research firm EMarketer to more than triple advertising sales this year to $150 million. Twitter generated $45 million in ad revenue in 2010, the first year the microblogging service sold advertising. However, the company didn't announce its advertising program until last April, so the $45 million figure doesn't reflect a full year of ads. Major advertisers include Sony Pictures, Doubletree Hotels, Red Bull and Starbucks. (Also see: Twitter says it's now valued at $3.7 billion) EMarketer also predicts Twitter ad revenue will hit $250 million next year -- assuming it continues to increase users and provide a return on investment to advertisers this year. “If Twitter can grow its user base and convince marketers of its value as a go-to secondary player to Facebook, it will succeed in gaining revenue,” said Debra Aho Williamson, eMarketer principal analyst. “In 2011 it must work overtime to give its early advertisers a positive experience.” While Twitter's advertising revenue will continue to be dwarfed by Facebook's -- EMarketer expects the social networking giant to pull in $4.05 billion in ad revenue this year and $5.74 billion in 2012 -- the microblogging company's ad sales should surpass those of Myspace by next year. Twitter was founded in 2006 and, as EMarketer notes, has become a household word. But despite its high media profile, only 8 percent of online Americans have accounts. Worldwide there are an estimated 190 million Twitter users. However, that number is misleading because Twitter, according to Nielsen Online, has a retention rate of only 40 percent. In part that means a lot of people sign up, tinker around briefly and then stop using Twitter, without actually deleting their accounts. Twitter's assumed value has grown rapidly in the past 16 months, from $1 billion in September 2009 to $3.7 billion in December 2010. Recently it received $200 million in funding from Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers.

Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.

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