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Twitter’s ad rates continue falling, down 18% last quarter

March 7, 2014
March 7, 2014
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Twitter’s advertising rate keeps falling.

The average cost to advertise on Twitter’s website and mobile apps dropped 18% in the last three months of 2013, the company just disclosed in its annual report. Total revenue still grew last quarter as more advertisers bought more ads to show more users. They just paid less to do so.

The average ad rate has been declining since at least the beginning of 2012. It’s down 81% from that point, according to data compiled by Quartz from regulatory filings.

Twitter says that rates have been falling because its inventory—the supply of available space to advertise on Twitter—is increasing. It also says that lower rates appeal to small businesses and international advertisers.

Still, the persistent decline suggests that Twitter, which sells most of its ad space through online auctions, hasn’t been able to find a stable price that’s attractive to clients, and it could keep falling.

“As we continue to optimize for advertiser value and the overall user experience, the cost per ad engagement may continue to decline over time, and we expect the cost per ad engagement to decline in the near term,” the company said.

Twitter, of course, can only charge what the market will bear. But if ad rates keep going in the wrong direction, as it predicts, the company will need to find many more users, get them to use the service more, and show them more ads. However, user growth has stalled—particularly in the United States, its most lucrative market—and the users Twitter does have appear to be less engaged. Displaying more ads is also a challenge on the diminutive screens of mobile phones, from which Twitter gets three-quarters of its ad revenue.

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