So Twitter hasn’t made money just being a social media darling. Instead it is relying on a medium from another century — your television set — to sell broadcasters and advertisers new methods to more directly connect with their core audiences.
And for that it turned to a small outfit in Cambridge, Bluefin Labs, which it bought earlier this year for $67.3 million. Born out of the Massachusetts Institute of Technology, Bluefin has developed a clever tool to mine Twitter to gauge viewers’ reactions to television shows and commercials. And now as part of prepping for its initial public offering expected for later this year, Twitter is talking to investors about how Bluefin will help turn a money-losing enterprise into a profit machine.
In many ways, Bluefin figured out the value of television for Twitter long before its new owner did. With more people talking about their favorite TV shows and commercials over the Web, Bluefin found ways to analyze that commentary and sell it to networks or other advertisers as new ways to monitor viewer sentiment.
The social Web has become a digital watercooler for conversations around TV programming, as millions of Twitter users regularly tap out 140-character quips while watching “The Walking Dead” or “The Voice,” and other favorites. In just a few years, Bluefin amassed an impressive roster of customers that included just about every TV network including NBC, CBS, and FOX, as well as some of the biggest brands in the world such as PepsiCo Inc. and Mars Inc. — customers that now belong to Twitter.
“The goal is for Twitter to become the social TV analytics company,” said Marie-Jose Montpetit, a research scientist at MIT. “Bluefin brought the analytics.”
Bluefin was founded in 2008 by MIT professor Deb Roy and his former doctoral student Michael Fleischman, and was among the first Internet start-ups working in a burgeoning field known as social TV.
“It was this idea of using electronic means to socialize around TV content,” said Montpetit, who teaches a course in social TV at the MIT Media Lab. “Television has always been social,” she said, but what Facebook, Twitter, and other social networking sites do is create online communities and discussion groups around shows and sporting events.
“What Bluefin managed to do was to link the Twitter chatter to what was happening on television,” said Montpetit.
Roy, the founder, is now chief media scientist for Twitter and his former student, Fleischman, is a product manager at Twitter. Both are in Kendall Square, where Twitter has established its East Coast headquarters. It also bought another Cambridge company earlier this year, Crashlytics, which makes software that detects bugs in mobile apps.
Twitter declined to comment, citing its upcoming IPO. But in a recent Forbes cover story, Twitter chief executive officer Dick Costolo said that “broadcasters have come to understand that Twitter is a force multiplier for the media they’ve created.”
Indeed, advertisers and networks don’t just want to know what viewers are saying, they want to directly engage with fans to increase viewership or more precisely target those consumers who are likely to buy their products.
Not long after Twitter acquired Bluefin, it released a product that advertisers can use to find out exactly who is watching which shows or commercials, based on the content and time of related tweets, and then advertise directly to those viewers on their Twitter feeds.
“Instead of advertising on TMZ and hoping that the people watching TMZ are 15-year-old girls, they can refine their advertising on Twitter and target just girls who follow Lady Gaga, Katy Perry, and Miley Cyrus,” said Michael Pachter, an analyst at Wedbush Securities in Los Angeles. “It’s a natural tie-in because advertisers and TV programmers are always trying to understand their audience.”
That’s just one way Twitter is courting TV. Earlier this month, Twitter announced a partnership with Comcast where subscribers can use their Twitter accounts to select and watch shows from the cable broadcaster. And in partnership with Twitter, ratings company Nielsen rolled out in October the first ever Twitter TV Ratings, which ranks shows based on their popularity in tweets. Twitter has also been hiring top executives who come from the television industry and ramping up efforts to build relationships with networks.
This TV business is a recent conversion for Twitter, as the company was figuring out ways to make a profit and was preparing for its IPO, said Brian Blau, an analyst at the technology research firm Gartner Inc.
“They really didn’t know what kind of company they wanted to be for awhile,” he said. “They have a very short list of markets they want to go after. Twitter picked TV as the one to go after during the IPO period.”
Twitter’s revenues hit $422 million for the nine-month period that ended in September, more than double the same period last year. But it continues to lose money, shedding $133 million so far this year.
Analysts tracking Twitter agree that the company is on track to become profitable in the near future, and that its focus on the growing social TV phenomenon will help it get there. Twitter is expected to push further into this market after its public offering, which the company hopes will raise $1 billion.
But relying on TV may take Twitter only so far. After all, according to Nielsen, only about 600,000 Twitter users tweeted about the huge season finale of “Breaking Bad,” compared with the 10.3 million people who watched the episode.