Sometimes it's tough being Jack Dorsey.

To the left and right, Facebook and Google are seeing their bumper digital ad revenues grow hand over fist during the coronavirus pandemic.

And then you look down at your own figures.

199 million users logged on daily, up a respectable 20% from a year before but still shy of the 200 million analysts were banking on.

Figure 1: Slow and steady: Can Twitter's social tortoise catch Facebook's hare, thanks to iOS 14.5?
(Source: Marten Bjork on Unsplash)

Plus this was the third quarter in a row where user numbers fell short of expectations. And it's not like people haven't been stuck inside with their phones.

Twitter's answer is that it banks on brands, who make big decisions about advertising campaigns after Christmas. They've been spooked by the US Capitol riots and presidential transition, says Chief Financial Officer Ned Segal.

But why hasn't Twitter moved into small mom-and-pop type direct advertising, hoovering up ad pennies from shuttered tiny shops like Facebook and Google have?

Is it because the platform can't, or is it a deliberate strategy?

Does iOS 14.5's rollout of privacy settings, preventing ad tracking, mean Twitter should do well then compared to its competitors?

It doesn't offer as much targeting anyway, so it doesn't depend on it.

And casting a furtive eye at the sprawling, partying Clubhouse next door, Dorsey's company is gingerly tiptoeing into audio, conceivably finally bringing Twitter head-to-head with telcos.

Could this change things?

The flight of the mad men

As a former major user might say, Twitter tilts its stall bigly at big brand advertising, making up 85% of its total ad sales.

So the pandemic rise in direct response advertising, with retailers and small businesses flocking online, has largely passed Dorsey's company by.

These types of ads constituted the majority of Facebook and Google's revenue even before COVID-19, so those companies were better placed to capitalize on the crisis.

By contrast, the big spenders on Twitter ads in recent years have included Nestlé and Verizon in the US in the first quarter of 2020. Kraft Heinz and Coca-Cola figured in Twitter's top five spenders in 2019.

Meanwhile, in 2019 Facebook featured just one consumer packaged-goods company in its top five.

A smidgen over a year ago, this comparison probably looked like it seriously flattered Twitter. Fine, until big brands start pulling the plug on their social media advertising.

Segal's explanation is that the unrest in the US around the election made big brands pause spending decisions.

"When there is unrest for one reason or another," he claims, big brand advertisers "often pause when there is a more important conversation than the conversation around their product."

A bigly problem for brands on social media

But big brands were pulling their advertising spending well before December. And in part, they were worrying about rub-off from social media drifting to the right.

Unilever announced in June 2020 it was pausing its social media advertising "through at least the end of the year."

It was "the polarized atmosphere in the US," as Unilever's Luis Di Como put it, that focused the UK-based multinational's mind.

Coca-Cola announced its own global pause on social media around the same time.

"There is no place for racism in the world and there is no place for racism on social media," said its CEO and chairman James Quincey, explaining the pause.

And he would await "greater accountancy and transparency from our social media partners," to assure Coca-Cola they weren't profiting from objectionable content.

So multinationals didn't want their brand equity to suffer by popping up right under hate speech. Of which, between Trump and the right-wing response to Black Lives Matter, there was suddenly a lot more.

And this was all bound to hit Twitter hardest – with its blast-approach to advertising more in tune with big brands than Facebook's or Google's micro-targeting sending you to your local pop-up.

Follow me

But Apple's now pulling the carpet out from under all this data-rich micro-targeting.

And this can only be good for Twitter, right? That, anyhow, is what the platform is hoping right now.

So Apple's change to its Identifier for Advertisers (IDFA) "in a way is going to level the playing field," Segal assured a Morgan Stanley conference in March.

And its competitors for advertising, like Google and Facebook, were "much better historically at leveraging all of the data that was available to them," admitted Segal. This ranged "from the device ID to what people were doing on other websites".

Twitter now will, just like its competitors, be using Apple's SKAdNetwork API.

This API aims to offer "click-through attribution for ads displayed in mobile apps," and do this without compromising users' identities, in the words of Singular, the startup behind it.

In other words, advertisers will just be "getting aggregated or campaign level data as opposed to device level data," and the entire ecosystem "will have to adjust to that," notes Segal.

If platforms are now going to be on a more level playing field, it can only be good for Twitter in the long term.

In the meantime, the company is midway through an acquisition spree to acquire new tech to give it more visibility about its users, from within the app. It has bought Scroll, a subscription service that removes ads from news sites, and a newsletter service called Revue.

Many think Twitter's plan is to build out a subscription service. But what it will include and what it will cost are the big unknowns – as is the question of whether anyone would be prepared to pay for it.

Building the Clubhouse next door

The rise of audio platforms may seem puzzling if never talking to other people again was the main selling point of social media.

But Twitter has rolled out its Spaces to take on Clubhouse – which it had previously attempted to buy, discussing a potential valuation of around $4 billion.

And then Discord joined the fray with audio chats. Facebook has been testing Clubhouse-like "live audio rooms" in Taiwan.

LinkedIn and Slack are at work on similar platforms, too. Spotify bought Betty Labs, whose live-audio app focuses on sports.

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The big question is how to earn money from all this.

Twitter has said it's working on a feature called "Ticket Spaces," letting users create virtual auditoriums which you need to purchase a ticket to join.

So having seen Facebook and Google stretch out their lead, Twitter may have sound ground for hoping the 14.5th lap will be the great equalizer.

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— Pádraig Belton, contributing editor special to Light Reading