SAN FRANCISCO -- In the run-up to what would be the biggest initial public stock offering for a consumer Internet company since Facebook, Twitter has nailed its biggest advertising deal yet.
The San Francisco-based social media company has reached a deal with Publicis’ Starcom MediaVest Group worth hundreds of millions of dollars over multiple years, the Financial Times reported.
The agreement is the first of its kind: a partnership between one of the largest buyers of advertising and Twitter. It comes as television networks prepare to woo advertisers with pricey presentations and parties to showcase their fall prime-time schedules.
It also heralds the arrival of Twitter as a must-have digital offering as more people visit social networking sites on mobile devices while watching TV. A recent study from Nielsen correlated increases in chatter on Twitter with TV ratings.
Twitter has been clear about its intention to make a major push to work more closely with TV networks. Adam Bain, Twitter’s president of global revenue, called Twitter a “bridge” to TV. And it’s clear that Twitter is making friends in TV and advertising.
“Twitter in a very short period of time has gone from an experiment to something that is essential,” Laura Desmond, global chief executive of Starcom MediaVest Group, told the Financial Times.
Twitter and Starcom MediaVest Group plan to create what they are calling a “social TV lab” to better understand how marketers can use social media for ad campaigns that influence what people watch on TV.
Twitter is also in negotiations with TV networks to bring more video content and advertising to the service, Bloomberg reported. Citing anonymous sources, Bloomberg said Twitter has talked to Viacom about hosting TV clips and selling ads alongside them, and that it has had talks with Comcast about a content partnership.
Twitter still only has a fraction of the $205 billion marketers spend on TV around the world.
Research firm EMarketer expects Twitter’s advertising revenue to nearly double this year to $583 million, from $288 million in 2012.
Wedbush Securities analyst Michael Pachter estimates that Twitter will generate $750 million in revenue in 2013 and net income of $145 million.
“We think that the Twitter business model presents significant monetization opportunity,” Pachter said in a research report Monday. “We believe that as Twitter continues to grow, advertisers are likely to recognize the inherent value of its platform in attracting eyeballs, and especially in engaging its users. This should allow Twitter to steadily increase advertising rates, driving overall revenue higher.”
Pachter said he expected Twitter to continue to grow for “at least a few more years.”
“We are highly confident that Twitter can grow revenues to the $2-billion level, and can generate operating profits of $700 million, but any growth beyond that level will require the company to launch new products,” he said.