Bloomberg News

Twitter’s $1 Billion Target Helped by Turkey as IPO Nears

January 14, 2013

Turkish pop sensation Murat Boz is closing in on 2 million followers on Twitter Inc., a sign that the U.S.-based microblogging service is gaining popularity overseas as growth slows in its home market.

Boz -- and Twitter -- began getting added attention in Turkey after the San Francisco-based company reached a deal with wireless carrier Turkcell Iletisim Hizmetleri AS (TCELL) that lets users send short Twitter messages, or tweets, from their handsets at no charge.

The pact represents a central ingredient of Twitter’s push for new users while preparing for an initial public offering. The company is targeting expansion in areas such as Asia, South America and the Middle East, where many people access the Web over inexpensive devices known as feature phones, rather than high-priced smartphones. By developing simpler versions of its application and landing deals with mobile carriers and device makers, Twitter is making its service cheaper and easier to use.

“We need to deliver a more compelling product for low-end devices,” Dick Costolo, Twitter’s chief executive officer, said in an e-mail.

It’s harder to get applications onto feature phones than it is to deliver them to smartphones, whose users can easily download new software onto Apple Inc. iPhones and Google Inc. Android devices through an online store. Putting Twitter on less-advanced phones requires tweaks to the software and navigating a thicket of regional players, Costolo said in an interview in November.

250 Carriers

By promoting Twitter, operators such as Turkcell are getting customers to spend more time on the Web and paying more for mobile data. In return, Twitter is adding new users, helping it sell advertising to marketers around the world.

“Our number of mobile Twitter users has increased threefold” since the partnership, said Emre Sayin, chief consumer business unit officer at Tepebasi, Turkey-based Turkcell. “These users have also generated revenue by clicking on photos and visiting other links that were shared in tweets.”

Twitter has partnered with about 250 operators in more than 100 countries, including India, Pakistan, Mexico, Brazil, and the Philippines. In some cases, customers can freely read and post tweets without incurring data charges. In other deals, operators just waive text-messaging charges.

Jana Messerschmidt, the Twitter vice president of business development and platform relations who’s leading the global effort, said Twitter’s international popularity is a selling point in negotiations.

‘Sticky Services’

“They are looking for compelling, sticky services that are going to drive users to use either Internet on their phone for the first time or use more data services than they used before,” Messerschmidt, a veteran of Netflix Inc. and DivX LLC, said in an interview. She declined to discuss any deal terms.

Messerschmidt arranged in July with Espoo, Finland-based Nokia Oyj to get a Twitter app pre-installed on the handset maker’s Asha line of phones, which are designed with stripped- down features to make them more affordable for buyers in India and other emerging markets. The companies worked together on the app’s look and functionality, Seppo Aaltonen, Nokia’s head of mobile-phone strategy, said in an e-mail.

“As a result of this close collaboration, we’ve delivered something perfectly tailored for consumers in fast-growth markets who are often cost-constrained but still want to have fun, new mobile experiences,” Aaltonen said.

Nokia is the largest maker of feature phones, which make up just more than half, or 3.2 billion, of the world’s mobile phones, according to research firm Gartner Inc. That share is set to decline as competing Android-based smartphones become cheaper and more prevalent.

Advantages Limited

That may limit the benefits of courting feature-phone makers and operators, said John Jackson, an analyst at Framingham, Massachusetts-based IDC.

“It’s not obvious to me that getting distributed across the fragmented landscape of feature phones is a worthwhile exercise at this point,” Jackson said. Forging such partnerships are a “lot of work” and Twitter’s efforts would be “better served chasing Google” to get apps featured on Android phones, he said.

Another challenge: Twitter is competing with Facebook Inc. to add users globally. Facebook expanded feature-phone offerings with its 2011 acquisition of Israeli startup Snaptu Ltd., which develops a stripped-down version of the site’s application for more basic handsets.

Smarter Chips

For now, signing users in developing markets will give Twitter a more attractive platform to sell advertising and reach its target of $1 billion in revenue in 2014. A widespread global audience may also attract more potential investors in the company’s anticipated initial public offering.

In addition to carriers and phone manufacturers, Twitter is also working with chipmakers to get its app bundled onto more handsets. Last July, it announced a deal with Hsinchu, Taiwan- based MediaTek Inc., which produces processors that go into about 500 million phones each year in emerging markets, including India and Southeast Asia.

MediaTek has begun including Twitter in software installed with its mobile chips. The handsets using these chips have the option of “enabling” the app right out of the box, said Sharon Lo, a spokeswoman for MediaTek.

“We strive to add more value to the phone,” Lo said. “If the end users are a group of Twitter users, then the handset maker can preload Twitter,” said Lo, who added that the company has similar deals with Yahoo! Inc., Facebook, and Gameloft SE.

U.S. Slowdown

Gaining users abroad is increasingly crucial as growth in the U.S. slows. Twitter will expand its U.S. audience 14 percent this year, to 36.3 million users, from 31.8 million in 2012, according to EMarketer Inc. That’s a slowdown from 2012, when the service grew 27 percent.

As Twitter pushes into more markets, Messerschmidt said she enjoyed seeing the many new ways the site is being used, from people checking cricket scores in India to farmers checking agricultural product prices in Africa.

“The Twitter service is so simple it should be able to reach anybody on the planet,” she said. “There’s lots of room for growth for us.”

To contact the reporter on this story: Douglas MacMillan in San Francisco at dmacmillan3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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