This post originally appeared in Business Insider.
By Jim Edwards
HootSuite, the social media marketing management company, just raised $165 million in a new fundraising round—that’s a massive sum for a startup. This tells us something about the size of Twitter’s advertising business. We know very little about the scale of Twitter’s revenues, so new information—even coming by proxy from one of its ad vendors—is extremely useful. (Some people estimate it at $1 billion. But no one really knows.)
First, HootSuite is one of only five Twitter Ads API partners—the companies who are allowed to sell dashboards that plus ads straight into the Twitter platform. That number will expand, but HootSuite has a huge advantage right now. Second, HootSuite says it has 7 million customers, although a majority of those probably use the interface for free. HootSuite says it has 79 or more Fortune 100 companies using its tools. CEO Ryan Holmes says his revenues have grown 300 percent. (But note that the company doesn’t disclose hard dollar numbers. Hmm.)
One reason we should take the investment seriously is that it comes from Insight Venture Partners, the New York-based firm that already holds a substantial stake in Twitter, according to VentureBeat. One presumes that IVP has enough visibility into Twitter’s business to know whether a $165 million bet on a vendor will pay off. And then there’s the risk. Ad Age notes:
CEO Ryan Holmes said HootSuite is charging enterprise clients anywhere from five figures annually up to the high six figures. He said he’s pursuing seven-figure deals where tens of thousands of employees within an organization would be using the software.
… HootSuite is “cash flow neutral,” according to a spokeswoman, with all profits being reinvested in the business.
Let’s do some back-of-the-envelope math. If HootSuite has 80 companies paying six figures in revenues annually, then a large portion of its revenue would total just $8 million, annually. If they’re paying “high” six figures, then it’s nearer $72 million. HootSuite has taken $187 million in funding so far. In fact, Holmes told Bloomberg yesterday that he had 246 Fortune 500 companies “using” HootSuite. He did not make it clear how many of those were paying. Let’s assume all 246 are hitting six figures: That’s $24 million annually. If they hit the “upper” six figures, that’s closer to $221 million annually. So it looks like the ballpark of HootSuite’s revenue is probably $50 million - $200 million annually. Remember, HootSuite only takes a fraction of the adspend that is passed through and spent on Twitter—so the size of its Twitter ad billing are multiples of that, making that $1 billion estimate look a lot more solid.