Twitter’s Golden Egg Nests in Future Ad Tech

Twitter's IPO hatches in coming weeks, but its business will likely take flight next year. The start-up based [in San Francisco] is poised to begin trading within weeks and ride a roller coaster of hype.

Twitter's potential revenue from sponsored tweets has been disclosed and debated. But its advertising future rests in mobile ad exchange MoPub, which it acquired for a reported $350 million last month.

MoPub provides Twitter a powerful mobile ad server. This combination will give advertisers valuable metrics about Twitter's audience and allow real-time bidding for ads.

Twitter is moving fast in mobile: More than 65% of its ad revenue comes from mobile devices, according to its regulatory filing.

MoPub meshed with Twitter will be able to offer ad space at precise moments to third-party publishers and advertisers. Ad buyers will be able to automatically purchase ads on preset conditions, or program them.

"What this acquisition will do is put Twitter on par with Google and Facebook, which already have exchanges. It basically puts them into programmatic ad buying," says Altimeter Group analyst Rebecca Lieb.

Programmatic ad buying is expected to rocket from last year's $1.92 billion to $8.7 billion in 2017, according to eMarketer.

Advertisers could preset ad targets at specific Twitter user activities and serve ads relevant to their tweets. If a Twitter user is tweeting about the Super Bowl, an advertiser could send a $5 coupon for Pizza Hut at them.

Twitter is just getting started with MoPub. But the timing is right to mesh the businesses given that Wall Street will be clamoring for growth once it becomes subject to quarterly reporting. "Integration is always difficult and time consuming, but it will probably happen within the next year," Lieb says. For advertisers, "it makes doing business with Twitter a no-brainer, and that's important."

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