With Facebook poised to be the next tech mega-IPO, it naturally is being compared with the last blockbuster float – Google. But how does Facebook compare with Twitter, the other big US-based social network?

From a business standpoint, Twitter and Facebook aren’t even in the same league. For 2011, Facebook’s revenue was estimated to be $ 4.27bn;the vast majority – 89% -of that revenue comes from advertising. It’s revenue growth is declining, but it’s hard to find an analyst who isn’t bullish about its future prospects.

Facebook dwarfs Twitter in terms of users, but more importantly, in terms of revenue. New York research firm EMarketer estimates that Twitter’s ad revenue will triple by 2014, but in real terms, that will only mean a rise from from $139.5m in 2011 to $540m.

To avoid unflattering comparisons to Facebook, Twitter has been trying to reposition itself.AFP Photo

Twitter has long been criticised for focusing too long on building a user base and not focusing enough on building a business. Over the last few years, it has been trying to create that business based on ads, rolling out sponsored trends, accounts and hashtags.

It also seems to be trying to generate revenue by selling insight into the flood of data created by its users. Its hundreds of millions of dollars of venture capital cash has allowed it to go on a shopping spree, and it’s bought up a number of companies like Backtype, that provide analytics of activity on Twitter.

However, up until now, Twitter hasn’t done much with those acquisitions. It was beginning to get a reputation like Nokia or even Google as companies where clever start-ups went to die. Users have grumbled that Twitter-focused apps such as Tweetie and Tweetdeck have stagnated since being bought by the big bird.

Twitter’s identity crisis

To avoid unflattering comparisons to Facebook, Twitter has been trying to reposition itself, claiming for two years now that it’s in a completely different business than Facebook. It began to describe itself as an “information network”rather than a social network like Facebook.

This was a clever attempt to leverage its growing use by journalists, positioning itself in a way that would resonate with them. It’s one of the reasons why Twitter got so much press relative to its size. However, Facebook, ever excellent at responding to competitive challenges, hired Vadim Lavursik as their “journalist programme manager” last year. It saw what Twitter was trying to do.

Now, Facebook’s IPO is giving it a flood of flattering press, and Twitter is doing its best to try not to get lost in the noise.

Beginning this week, Twitter will unveil a number of new analytical tools, Erica Anderson, Twitter’s manager for news and journalism told a conference in New York last weekend.

Anderson said that tools will help publishers track the reach of their tweets. She also said the analytical tools could help companies predict behaviour based on the intentions that people express in their tweets.

Twitter has also put CEO Dick Costolo on a press campaign. Wired is running the CEO under that banner:“Twitter is growing up” under Costolo.

As Mike Isaac of Wired says, Twitter has always faced a question that Facebook and Google haven’t: What is Twitter? What kind of company is it?

Costolo says it’s a media company, a slightly different take on the idea of Twitter as information network, but that sounds sexier to investors.

Trying to figure out what Twitter’s business model is has become a favourite game among tech watchers, but Costolo is also clear that Twitter’s business model is based on advertising. That’s the basket where they are putting all of their eggs.

Twitter may dominate in ads on Twitter. The problem for the company is Facebook dominates in display advertising, and Google dominates in lucrative search-based advertising.

In the US, Facebook took the display advertising crown from Yahoo last year, and it seems to be vaulting ahead of all of its competitors, far ahead of Google. Facebook had 28% of display-advertising impressions in 2011, according to ComScore. Now No. 2 Yahoo, only had 11%, and Google lagged far behind in fourth with only 3.6%.

In a lot of ways, this shows how dominant Facebook and Google are in their respective businesses compared to companies like Twitter. Twitter still holds an important niche, but it’s a niche.

Costolo says that Twitter is in this for the long haul. Unfortunately, venture capital investors have limits to their patience.

Publish date: January 31, 2012 5:14 pm| Modified date: January 31, 2012 5:14 pm

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