Twitter’s Ad Business Is Growing Like Crazy: 50 Percent Since Spring

Twitter has a better advertising business than Facebook. Here's what you need to know:

Back in the spring, Twitter boasted a whopping 1,600 advertisers. It was a pretty impressive number when you consider the fact that (a) it’s not self-service and (b) the minimums involved, though flexible, are rather hefty. To get on board with promoted tweets or promoted accounts, you can expect to spend $5,000 a month for a minimum of three months (though I know you can knock this down to significantly less without much work). To launch a one-day promoted trend, you’ll have to wait several months (there’s a waiting list) and be ready to shell out an eye-popping $120,000.

It’s not exactly the nickel-and-dime stuff that small businesses are running on Facebook.

So, it was pretty wild when I heard last week, directly from the mouth of Adam Bain, chief revenue officer at Twitter, that the company’s increased the number of advertising clients by 50 percent since last spring. He announced at the Business Insider IGNITION conference that Twitter now has 2,400 paying advertisers – and that it’s getting ready to pilot a self-service program.

Already, Twitter is estimated to be generating $140 million in revenue for 2011. Granted, it’s much smaller than Facebook’s forecasted $4.27 billion for this year, but when you look at Twitter’s approach – which can only be characterized as deliberate growth – you can see how this is set to explode in 2012 and 2013.

The growth model actually looks pretty simple: continue to on-ramp big-dollar advertisers through existing channels while developing the self-service model for smaller clients and “impulse ad buys.” Any small business that is advertising on Facebook will at least consider a test campaign with Twitter, which means the latter can attract a large number of opportunities without having to market aggressively for them.

It doesn’t take much thinking to see the implications.

Just by launching, Twitter will be able to generate serious growth. And, it’s showing solid returns on its existing advertising business. These revenue streams will likely continue to grow, especially given the company’s current advertiser retention rate of 80 percent (according to Bain).

It may take a while for Twitter to bust the billion-dollar mark, but the company is certainly building a model that should scale effectively over time. I still think it should develop some non-advertising revenue streams (corporate accounts would be genius, as I’ve maintained for several years, now), as it would add some diversity that can be helpful when economic conditions beat up the ad market. But, at this stage of the game, it’s probably not essential.

The moral of the story: Twitter’s advertising business is growing like crazy. And this growth will probably accelerate insanely when the self-service product is launched (I know I’ll try it).

Rumor has it that Twitter is looking at 2013 for an IPO. The growth in its ad business next year, especially with a diversified and enormous advertiser base from self-service, along with big-ticket advertiser growth as we’re seeing now, should leave the company well-positioned to hit a nice big market cap.