The social networking firm has posted disappointing results and now look for other revenue streams to upgrade its performance
Last week, Twitter disappointed a lot of its investors when it posted far below than expected results. The company missed its first quarter estimates and reasoned the underperformance to the big advertising brands for not promptly increasing their spending.
For the current quarter, therefore, Twitter’s revenue is expected to shrink around 17% –just eighteen months ago, the company was able to double its revenue. The investors have been quite unhappy about the company’s performance. The ad revenue has been the only beacon of light for the company amidst a large number of issues which the company has been encountering. For a long time now, the social networking firm has been in the vortex of stagnant user growth, unorganized product strategy, and management turnover.
The reason due to which big brand advertisers are not highly interested in the company is that the company’s ad promotions have got a traditional touch. The company’s signature ad product is basically a “promoted tweet” which is similar to the regular but carries promotional images, links, and text. According to Interpublic Group’s executive director of a social media agency, James Douglas, the ad product on which Twitter has been working is not what the brand advertisers are on the lookout for more catchy style of advertising which might include interactive ads or videos.
According to eMarketer, Alphabet Inc.’s YouTube has garnered the largest share of U.S. video ad dollars at 20%, on the video front. However, the social networking giant, Facebook Inc., who has just started video ads in 2013 has gained momentum quiet rapidly. When the company posted its earnings, it showed a revenue jump of more than 50%, such boastful increase has been attributed to the advertisers’ videos.
Therefore, the San Francisco, Calif. firm is looking forward to enter into the revenue stream of ad videos. Meanwhile, around the fall, it is expected to start the live-streaming of the first of 10 National Football League games.
The terms of the deal between NFL purports that the company will have approximately 15 slots which it can use to sell commercials during each game. On Tuesday, the $10 billion company expressed that it has already closed an agreement with one of the major marketers to advertise during live-stream. However, many major marketers are not endorsing Twitter’s statement and they have been reported to have cited that they are searching for other company to expend their dollars on.
eMarketer has reported that in the U.S. during the current year the digital video ad spending is likely to increase by 28.5% and reach at $9.84 billion. Twitter stands amidst strong rivals who are gunning to attract those dollars to them. According to Shelby Saville, president of innovation and investment platforms at Mediavest Spark –an ad buying firm –the Californian firm is “not yet at the forefront of the video content conversation and that is where the dollars are.” She underlined that the platforms like Snapchat, YouTube, and Facebook are the one on which the companies are planning to upload their video ads. Additionally, Twitter doesn’t have large number of users who could engage with the ad.
Last year, Coldwell Banker Real Estate LLC purchased San Francisco, Calif. firms promoted video ads but the users didn’t “engage” –meaning they didn’t share, view, or comment on the video –well enough to cover the marketing cost. However, Coldwell’s chief marketing officer, Sean Blakenship cited that the response had been much favorable on Facebook.
However, there are several brand advertisers who have been happy with their decision of using Twitter for promoting their products. Companies like Bank of America and Heineken NY have been quite successful while using Twitter’s promoted tweets.
The time will tell whether the company has been able to attract the brand advertisers or not. If it couldn’t then it is highly likely to see more fall in the revenue which will ultimately hit hard on the stock. As of now, at the market which closed on Friday, Twitter Inc. stock stood at a price of $14.61.