Twitter’s MoPub Sale and the State of Digital Media

As you may have heard, Twitter this week completed the sale of MoPub, the ad-tech company it acquired in 2013. It sold the company to AppLovin for $1.05 billion. More importantly, this move could be emblematic of the state of digital advertising, including a privacy-driven shift to all-things first party.

Before going into those macro drivers, let’s back up and look at Twitter’s reasons for buying MoPub in the first place. The year was 2013, as noted, and a different set of circumstances ruled the digital media landscape. Ad-tech was at its apex, though the age of privacy reform was just around the corner.

For Twitter specifically, it wanted to have in-house competency for digital ad optimization. Given the vast and constantly updated content feed that’s endemic to its flagship product, an in-house ad-tech play seemed logical. And prior to being sold, MoPub brought Twitter about $188 million in 2020.

Furthermore, MoPub’s acquisition price of $350 million in 2013 makes this week’s sale an even 3x return, notwithstanding interest or EBITDA impact in the intervening years.

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Macro Variables

That brings us back to the present.  There are clearly a different set of macro variables that rule the digital ad landscape – most of them flowing from privacy reform and large-scale initiatives like Apple’s ATT. As we’ve examined, this environment places greater value on first-party data.

Fortunately, Twitter has a sizable first-party network. The volume of content-specific engagement that happens within its four walls presents a sizeable opportunity for its ongoing ad revenue efforts. And the key word there is content, as another privacy-era modality re-emerging is contextual targeting.

With contextual advertising the content is targeted as opposed to the user. This makes it more privacy friendly. And the return to contextual advertising (which had its own heyday before the age of ad tech in the late 2000s and early 2010s) will apply to publishers of all stripes, including social media.

So with all of these opportunities in Twitter’s ad business, why it would sell its biggest ad-tech asset as opposed to doubling down on it? The answer comes down to a few factors, including strategic alignment and focus. For the former, MoPub was essentially built for a different era in ad tech.

But the latter point (focus) is more pertinent. Twitter recently rolled out a plan to double its revenue to $7.5 million by 2023. This involves premium subscriptions, newsletter and creator-economy tools, and some first-party-driven ad/sponsorship programs – most of which don’t play to MoPub’s strengths.

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Creator Economy

Lastly, another thing caught our eye about Twitter’s MoPub sale. Specifically, what does it say about Twitter’s plans to target SMBs as advertisers and creators (don’t forget Twitter’s creator-economy play)? For example, In TechCrunch’s coverage, the following statement stuck out (our emphasis):

Twitter now sees more potential in developing other areas of its business amid its accelerated product development. Specifically, the company said it’s now redirecting its resources toward performance-based ads, SMB and commerce.

So the question is what products and monetization programs Twitter will roll out that appeal specifically to SMBs? In the simplest sense, many of its existing visibility programs like amplified/sponsored tweets could have a long-tail opportunity. Further into its road map, SMB-specific offerings could emerge.

The latter could include, again, the moves Twitter continues to make towards the creator economy. There’s a big overlap in the venn diagram between SMBs and creators. And Twitter has been a big proponent of the creator economy along with players like Pinterest, Adobe, Vistaprint, and Shopify.

This could play out as a suite of tools for SMBs to create and broadcast their offerings. As we’ve examined, the creator economy is most conducive to the yoga studios and Etsy artists of the world. But it could also grow in restaurants (think: cooking shows) and home services (think: how-to videos).

We’ll keep watching to see where Twitter – and all of the above players – go next with the creator economy.

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