The Huge Windfall That Twitter Is Missing Out On

One simple tweak could bring in tons of revenue for Twitter.

Aug 18, 2014 at 12:00PM

Twitter Hq
Twitter is leaving #money on the @table. Source:

Twitter's (NYSE:TWTR) 271 million monthly active users are in a minority. The majority of Twitter's audience never logs in, according to CEO Dick Costolo.

On Twitter's latest earnings call, Dick Costolo said: "There are hundreds of millions of additional unique visitors who come to Twitter every month, but don't log in. When you consider the combination of monthly active users and unique visitors, the size of our audience on our owned and operated properties is two to three times that of just our monthly active user base."

What's more, Twitter is catering to this unregistered audience, and is missing out on the huge opportunity of advertising to them. Google (NASDAQ:GOOG) (NASDAQ:GOOGL) doesn't require you to log in before it shows you a bunch of ads in its search results. Why should Twitter?

Twitter might be too accessible
Twitter is actively catering to its unregistered users. Last quarter, the company revamped user profiles to make them more appealing to visitors who don't log in. Costolo added, "We will run experiments and continue to run experiments to improve the overall experience for logged-out unique visitors."

Twitter visitors are able to follow trending topics, hashtags, and use Twitter's search feature to find news or people they're interested in, all without logging in. Comparatively, unless you know exactly what you're looking for on Facebook (NASDAQ:FB), you can't access anything without logging in: no search, no popular news, nothing. This drives Facebook's user base up, while most casual Twitter users who just want to follow a hashtag from their favorite TV show can get by without ever registering.

That's not really a problem, though
The real issue here is that Twitter is catering to an audience that it isn't monetizing. While there are merits to this strategy, it's a missed opportunity.

As mentioned, Google doesn't require users to log in before it starts showing them ads. Certainly, it prefers that web searchers log in so it can target advertisements better; but it still makes money on just about every unique visitor. In the early days of Google, users didn't have accounts. As Google has rolled out or acquired more services, it's increased the number of users with accounts, allowing it to personalize search results and improve ad targeting.

Twitter ought to be able to take a page out of Google's book and monetize unregistered visitors. In fact, they're probably easier to monetize than typical timeline viewers for several reasons.

First, visitors who don't log in are using search to find content they're interested in. This is the closest analog to Google, and Twitter can use a similar ad product to allow advertisers to target keywords. For example, someone who's always searching for news on sneakers might be a good target for Foot Locker.

Second, unregistered users are also able to follow hashtags. This is even more targeted than searching, because a hashtag often comes with a specific context. Someone searching for a hashtag from a TV show might see ads from the same companies that advertise during that program.

Finally, these anonymous users are visiting registered users' profiles. It's a safe bet that they have similar interests to the users whose profile they're visiting.

Don't lose focus
Twitter should certainly try to convert visitors into users as much as possible by communicating the benefits of signing up. Currently, you get a message like this: "Not on Twitter? Sign up, tune into the things you care about, and get updates as they happen." There's also a sign-up box that says, "Don't miss any updates from [user x]." These are things people can already do without signing up or logging in, though.

Twitter needs to work on its messaging. Facebook offers users the ability to stay in touch with friends, see their photos, and share what's new by registering. A registered user is worth much more than an unregistered user due to better targeting abilities and stronger engagement.

In the meantime, however, Twitter has an opportunity to easily monetize those visitors who aren't logging in.

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Adam Levy owns shares of Apple. The Motley Fool recommends Apple, Facebook, Google (A shares), Google (C shares), and Twitter. The Motley Fool owns shares of Apple, Facebook, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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