Things happen quickly on Twitter (NYSE:TWTR). If a user follows more than a few dozen accounts, tweets often come in faster than he can read them. That makes it rather difficult to monetize, since users become used to skimming through content. Direct response advertisements have already shown to be less effective than initially expected. That's because users have no time to consider the offer in the advertisement -- there are more tweets to read!
Last month, Twitter investor Chris Sacca said Twitter should acquire a start-up he's invested in called Rex. Rex allows users to curate a list of products they love and showcase them to other users. Users can save items for later review in an area called "the vault." It's a concept he's brought up with Twitter in the past, and apparently it was listening.
Twitter recently unveiled two new features. First, it created product pages, which feature information about a product, tweets about that product, and often the ability to purchase it. Second, it created "collections," product recommendations it's testing with select influencers like Demi Lovato and The Ellen Show. These new features could enable Twitter to take the lead when it comes to social commerce.
About that buy button
Twitter introduced a buy button last fall, and it received very little use from advertisers. Similarly, Facebook (NASDAQ:FB) has experimented with a buy button in its news feed advertisements. Unlike Google, which benefits from the fact that users are actively looking for information on items, Twitter and Facebook ads are more passive.
Both Twitter and Facebook's best bet for getting the most of its buy button is using retargeting. That's when a user views an item on a store's website or has otherwise expressed interest in a product in the past. Then they can show an advertisement for that product complete with a button that makes it really easy for them to buy it.
To that end, Twitter acquired TellApart, which specializes in cross-device retargeting. That means a user may see ads on his smartphone based on items he's browsed on his desktop or tablet -- which are much more common devices for online shopping. With 89% of advertising revenue coming from mobile, Twitter needs to make those ads as effective as possible to grow revenue.
Taking it one step further
Product pages and collections take retargeting one step further -- basically, enabling users to retarget themselves. If a user has reviewed a product page and saved it to a collection, it's more likely he'll respond positively to an ad featuring a buy button.
Twitter ended its blog post announcing the new features saying, "In the coming months we'll be testing more new experiences we hope give you the most personalized and relevant information about the places and things you want to explore." Providing multiple opportunities for users to interact with products and local businesses will give Twitter more data on what products to advertise.
It's not clear that Twitter will otherwise make money from its buy button, meaning users who simply browse to a product page on their own and purchase a product directly through Twitter might not necessarily result in any additional revenue for the company. Facebook doesn't charge a fee to use its buy button, but it says it hasn't ruled out eventually adding a fee. Therefore, the best case for Twitter's new product pages and collections is to include them in advertisements and to collect data on its users' product interests.
Dominating social commerce
Social commerce is growing rapidly, and it's expected to top $15 billion this year, up from $9 billion last year. But Twitter is competing with social networks like Pinterest that are often used for product discovery instead of real-time information. Enabling users to learn more about products and what people are saying about them through product pages and letting them save those products in collections will help Twitter compete for its share of social commerce and indirectly benefit through advertisements.