Twitter Inc. Thinks It Can Suggest Apps Better Than Your App Store

An example of the carousel unit. Source: Author screenshot

For app developers looking to boost downloads of their apps, social media app-install ads have been a simple and effective way to do so. Facebook introduced the ad units on its platform in 2012, and Twitter soon followed with its own version. Both are competing largely with Google for a share of the lucrative app-install ad market.

Twitter recently began testing an ad unit that allows users to scroll through multiple app-install ads in a carousel. The unit appears to simply enable Twitter to show more ads in the same amount of space, with the apps being unrelated. With the unit, and its focus on app-install ads, Twitter is relying on one of its strengths to serve relevant ads. However, it still needs some work before it can take over for Google and Facebook in recommending new apps.

Going for a ride on the carouselImplementing a carousel for ad units is another design lifted from Facebook (who got it from another company). The carousel allows Twitter to place multiple ads in the same amount of space, and test user engagement. The advantage of the carousel design is that an advertiser can be sure that a user saw its ad if he purposely slid the carousel over to the next ad. This lets Twitter and advertisers gather valuable data on how its users interact with advertisements.

Interestingly, the carousel (by its nature) increases ad inventory for Twitter. Twitter doesn't have a shortage of ad space. The company's long-term goal is for a 5% ad load -- meaning for every 20 tweets you see, one will be an ad. In its latest conference call, management reiterated that they're still not even close to that 5% goal in most verticals, so there's a lot of potential ad revenue growth still to come.

Asking advertisers to jump onThe biggest thing holding back Twitter is that it doesn't have nearly as many advertisers as Facebook or Google. Twitter reported that it has 60,000 advertising partners at its analysts day in November. Meanwhile, Facebook just announced that it has 2 million advertisers on its platform, and Google is estimated to have 4 million advertising partners. Attracting more advertisers will enable Twitter to increase average cost per engagement. More importantly, it will improve its capability of suggesting an app (or product) that users are more likely to download because Twitter will have more options to choose from.

Facebook has quietly introduced a feature to its app that provides users with app suggestions. The Suggested Apps Feed is hidden under the "More" menu in Facebook's app and simply recommends 25 apps to users. The power of its recommendations comes from its knowledge of your behavior as well as the many advertising developers on its platform.

Twitter has just one of those. Earlier this year, Twitter updated its terms of service to include the ability for it to see what apps you've installed on your phone. The move allows the company to target its advertisements better, especially app install ads.

Google, similarly, just rolled out a feature for AdMob partners to use its Google Play data to target advertisements better based on previous app purchases as well as in-app payments. The addition of payments data gives Google an advantage over Twitter and Facebook in its efforts to attract more developers to its app-install ads.

Great potentialTwitter has excellent potential to provide app suggestions, it just needs the advertising partners that Facebook and Google has. At its core, however, Twitter knows its users interests very well, since users only follow people and topics they're interested in. Facebook is more of a social graph compared to the interest graph of Twitter, which gives Twitter a stronger signal with less noise to filter with regards to what kind of advertisements users will respond to.

Twitter may eventually provide better app suggestions than Facebook or Google, but for now it's still working to attract the advertisers. That means there's a lot of potential upside to Twitter, but management has a lot of work to do to capitalize on it.

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Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google (A shares), Google (C shares), and Twitter. The Motley Fool owns shares of Facebook, Google (A shares), Google (C shares), and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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