Twitter, eyeing $15 billion auto ad market, says users buy more cars

About 6 percent of households with Twitter users bought a new car during a recent six-month period, the social network said Thursday in a blog post. Photo credit: BLOOMBERG

DETROIT (Bloomberg) -- Twitter Inc., seeking a bigger slice of the more than $15 billion auto-advertising market, said households with users of its service were twice as likely to buy a new car as the average U.S. household.

About 6 percent of households with Twitter users bought a new car during a six-month period measured by partner Datalogix Inc. last year, the San Francisco-based social network said Thursday in a blog post.

Those households bought new vehicles at double the national rate from April to October, according to Datalogix and IHS Automotive's Polk.

The car-buying data "moves the conversation from 'why Twitter?' to 'how should we use Twitter?'" said Jeffrey Graham, ad research director at Twitter. "The measurement shows that Twitter works and there's a huge opportunity there."

Twitter CEO Dick Costolo is focused on reversing a slowdown in user growth that triggered a 24 percent plunge in Twitter shares the day after its first earnings report as a public company this month.

The more significant measure to monitor is the company's advertising revenue given the "tremendously under-developed potential for monetization" of the platform, according to Brian Wieser, an analyst at Pivotal Research Group in New York.

'Niche medium'

"We have always held that Twitter as it stands is a niche medium," Wieser, who rates the stock sell, wrote in a Feb. 5 research note. "But that doesn't mean that it doesn't retain significant value for advertisers at its current scale."

Sales of advertising services more than doubled in the fourth quarter to $220 million, contributing 91 percent of Twitter's $243 million revenue for the period, according to data compiled by Bloomberg.

The company generates more than 85 percent of revenue through third parties paying to promote their tweets or accounts.

Automakers and dealers comprise the biggest category of U.S. advertising spending tracked by Kantar Media.

Expenditure on automotive ads amounted to $15.4 billion in 2012 and rose 2.3 percent in the first nine months of last year to almost $11 billion, according to the researcher.

Users who click, retweet, reply or favorite an auto advertisers' promoted tweet were 32 percent more likely to purchase a new vehicle than the average Twitter user, according to the findings of the Datalogix study.

Industry focus

To make advertising on its service more effective, Twitter began catering to separate industries last year. Its salespeople previously were organized by geographic region.

Facebook Inc. also reoriented its sales staff to focus on industries in 2012, with automotive as a focus.

Twitter may soon have a tool that Facebook doesn't.

The company in August hired Nathan Hubbard, the former president of Ticketmaster at Live Nation Entertainment Inc., to make it possible for users to shop directly via its 140-character messages.

Facebook said in January that it has no plans to go into the direct e-commerce market. For now, Graham said automakers including Toyota Motor Corp. and Tata Motors Ltd.'s Jaguar Land Rover unit are staging successful campaigns that tie in television ads with their brands' presence on Twitter.

Toyota paired with Walt Disney Co.'s "The Muppets" in Super Bowl ads for its Highlander SUV earlier this month and used the hashtag #noroomforboring to direct Twitter users to its U.S. account, which featured posts by characters such as Pepe the King Prawn during the game.

Jaguar promoted its F-Type Coupe with the hashtag #GoodToBeBad in a spot that celebrated British movie villains.

"Twitter ads produce really good results for auto brands when they're about good content and not interrupting users," Graham said.

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