Twitter’s biggest challenge post-IPO: Optimising for advertising is a double-edged sword

alenhardt:

This short blog post should inspire student conversations about the web in my composition and desktop publishing classes. I am looking forward to discussing advertising’s place on the web with my English 110 students for our next composition unit, Argument and Technology: the Future of Social Networking, Websites, and Communication.

Originally posted on Gigaom:

As Twitter tries to get its financial house in order prior to going public at a multibillion-dollar valuation, one of the aspects of its business that will be under an intense spotlight — as it was with Facebook (s fb) — is the company’s ability to generate advertising income, since that makes up the vast majority of its revenue. Among other things, Twitter will have to show that in-stream ads not only work but are growing rapidly enough to justify a market value as high as $20 billion.

As Quartz has pointed out with a helpful math lesson, Twitter’s revenue per user is much lower than Facebook’s, currently running at about $0.55 vs. $1.41. To some extent the two are apples and oranges, since Facebook has a lot more variety when it comes to ad formats and can therefore charge more — but even so, investors are still…

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