Twitter is trying to tell Wall Street that it doesn’t have a user problem. Just a counting problem.
In recent months, the company has been telling investors not just to focus on the number of people who use the service once a month — its “active user” total — but on people who see tweets all over the Web. As The Wall Street Journal reported, the company plans on making this pitch more emphatically next week, during its earnings call.
But here’s the thing. Investors are fixated on the number of active Twitter users for a good reason: They’re the key to the company’s ad business.
The “atomic unit” of Twitter’s ad plan is a “promoted Tweet,” a message that’s supposed to be tailored for individual Twitter users based on their “interest graph” — the people they follow on the site and the messages they respond to.
That information plus the fact that promoted Tweets are “native ads,” since they appear in Twitter users’ streams, are what’s supposed to set Twitter’s ads apart from the rest of the Web.
But if Twitter wants to capitalize on the people who see Twitter messages without using the service regularly, it’s going to need a new ad plan. It will have to figure out how to sell ads to people who visit the site but aren’t logged in, and how to sell ads to people who see Tweets on other sites.
Last month, Twitter gave us a hint about the way it could tackle the first problem when it unveiled a new version of its home page that highlighted the World Cup. It’s not a leap to imagine the company creating other home screens tailored to other big events — and selling ads to companies that wanted to be associated with them.
Generating ad dollars when Tweets appear on other people’s websites will be trickier. Twitter likes to note that YouTube’s videos carry ads on them when they’re embedded around the Web. But it’s harder to imagine a parallel for embedded Tweets. You couldn’t run the equivalent of “pre-roll” ads in front of Tweets.
Still, Twitter could at least capitalize on the real estate it owns when a visitor clicks on an embedded Tweet and ends up back on Twitter. That Ellen DeGeneres Oscars selfie, for instance, was embedded 13,711 times and generated 32.8 million views. If Twitter wanted to, it could certainly sell ads on a page like this.
But in theory, the ads that Twitter shows to non-logged-in visitors should be worth much less to advertisers than the ones it shows to its active users. After all, Twitter knows very little about new visitors, compared to the data set it has built up on its 255 million monthly active users.
If that’s the case, then Twitter’s non-logged-in ad business could end up looking a lot like the Web ad business everywhere else — a market under ever-increasing price pressure, because the Web’s inventory of impressions keeps climbing every minute.
Or, alternately, Twitter will have to tell advertisers that the data it has on its users isn’t that special, and that it can do a fine job pitching ads to people it doesn’t know.
The irony here is that the ad strategy Twitter is already using is robust enough to generate more than $1 billion this year. Yet the company may have to rethink its ad pitch in order to accommodate the story it sells to Wall Street.
This article originally appeared on Recode.net.