The deal between Twitter and Omnicom locks in ad rates at current market value and provides the agencies in the Omnicom network with exclusive access to preview new ad units and opportunities that Twitter develops in the future.
Financially, this translates to $28.5M possible ad buys per quarter, which amounts to around 10 percent of Twitter’s current quarterly revenue projections. This decision to lock in ad-rates comes right after Twitter released their Q1 of 2014 earnings report. The report recorded a year-over-year ad revenue increase of 125 percent.
Recently released information has also noted year-to-year price increases upwards of 10% for ad units from social network rival, Facebook.
Despite recent Wall Street disappointment with user-base growth, Twitter’s user base is projected to increase by 24.4% in 2014. Although the projected increases are slower than the rapid growth experienced in Twitter’s infancy, analysts have predicted that Twitter will significantly increase its user base within the next 4 years through onboarding users from emerging markets.
A large portion of these users will likely access the internet solely through their mobile devices. Compound this with the fact that approximately 80 percent of the advertising revenue, or $180MM, is already coming from mobile ad units, it makes sense why the deal would be specific to mobile.
Taking into account this information, is the deal a smart move for the Omnicom network? Yes. Not only because growth projections for Twitter are still positive, but the increasing focus on mobile in the digital advertising space is causing ad-unit prices to rise.