With Twitter’s IPO, 5 Key Things You Need to Understand about the Social Ad Revolution

With Twitter filing its documents to go public, moving towards an IPO before Thanksgiving, here's what you need to know:

1) Big Media is Getting on Board

What better sign that Twitter has matured to a real force in advertising, than a stamp of approval from the highest-rated TV network. Last week CBS and the NFL announced massive deals with Twitter — they’ll embed their clips, along with ads, in Twitter’s feed, and will buy ads on Twitter, or ‘Promoted Tweets’ to drive people to their content. Viacom was the first to make this kind of deal this summer — CEO Philippe Dauman telling me it’s a relationship that really works — driving viewers to his cable channels, which then drives those same viewers back to Twitter, to keep the conversation about his shows going. The addition of CBS and NFL to Twitter’s partnership arsenal are a big deal: CBS has been more restrained about offering its shows online than the other networks, and this is the first time the NFL has offered any digital video outside its own apps and websites. The eagerness of these traditional media giants to bring content to Twitter’s global conversation is a testament to its value.

2) Social Media: Not a Rival-- A Complement

Facebook and Twitter’s growing popularity initially sparked concern that they would steal ad dollars from that Madison Avenue stalwart: TV. In fact, while digital advertising gains ground, it’s not at the expense of TV, which continues to grow annual revenue, but at the expense of print. Back to the CBS example—CBS is not worried Twitter will steal viewers and ad revenue. Both Twitter and Facebook are positioning themselves as valuable *partners* to complement TV and attract those mega TV ad dollars. Starting this week Facebook is sending reports to the top four US TV networks with data about the social conversations their shows spark on the social network. This fall TV season we expect the launch of a ‘Nielsen Twitter TV Rating,’ announced last December. Both Facebook and Twitter are jockeying to be the necessary ad buy for every TV network and their biggest marketers; it’s too soon to say which will prove more effective.

3) Data is Huge

Over the past year there’s been an explosion of data on just how well social ads work, shifting attention away from an obsession with the number of people who click on ads. People don’t need to click on ads—the data finds—for them to have an impact. Facebook and TMobile released a study that found that a new social ad campaign helped drive nearly 800,000 new additions to T-Mobile’s network. Mondelez, the company that makes Cadbury Crème eggs, said Facebook’s ads had a better return on investment than TV spots. Twitter has a site dedicated to its "success stories" touting high returns on investment. Plus ComScore recently released a study that found that people who see mobile ads are 28 percent more likely to show “purchase intent” — or want to buy a product — than those who don’t see the ads.

4) Madison Avenue Tipping Point

Last week was Advertising Week — an annual gathering of Madison Avenue execs and representatives from all the biggest ad platforms. Everything I heard, as I moderated two panels and spoke to dozens of execs on all sides of the advertising equation, indicated that social ads have hit a tipping point. Thanks in part to all that data, plus a lot of time, I didn’t hear any skepticism. Marketers and ad agencies were not asking *whether* they should buy social ads, but rather *how* and *how much.* And Facebook and Twitter are not in a bake-off. The CEO of ad conglomerate Interpublic, Michael Roth told me he’s interested in both types of ads, saying “You can target marketing to the extreme.” He’s drawn to the fact that these social tools are so popular on mobile devices, saying “More people access the Internet via mobile devices than any other medium. That’s where the money is, that’s why we’re focusing on it.”

5) This is just the beginning

We talk all the time about Facebook’s billion plus users and Twitter’s global town square. But despite this massive scale — and the fact that the amount of time people spend consuming digital content just surpassed TV time, advertising dollars are still trailing. 40% of global ad spending is on TV, just 18% on Internet ads, according to a new study by Zenith Optimedia. And those Internet ads include the search ads Google dominates, and the kind of traditional display ads Yahoo and AOL offer. Social ads are just a tiny slice of that. But the growth in digital activity is on mobile (the number of US Internet minutes nearly doubled from June 2010 to 2013, thanks entirely to mobile). And what are people doing on their phones and tablets? More often than not: checking Facebook or sending a Tweet. Now it's time for ad dollars to catch up to user behavior.

Photo: Harriet Taylor/CNBC