According to a recent report published by the Business Insider, the global online video ad revenues are projected to grow from 2.8 billion in 2013 to $5 billion in 2016. Video ads with a 1.84% click-through rate (CTR) ranks the highest among all digital ad formats. Social media companies like Facebook and Twitter are both embracing these video ads to drive revenues higher. Online advertising giant Google is already successfully leveraging this video growth as was evident from YouTube’s blow out quarter reported earlier.
Earlier this week, Twitter (NYSE: TWTR) announced their second quarter results. They continue to improve service offerings, but the continued slowdown in user growth is hurting their stock. Revenues for the quarter grew an impressive 61% to $502 million, significantly ahead of the Street’s forecast of $481 million. The growth was driven by advertising revenues which increased 63% to $452 million. Mobile advertising revenues accounted for 88% of total advertising revenues. International revenues are delivering strong growth as well. Revenues from international markets increased 78% to $181 million. For the quarter, EPS of $0.07 was also ahead of the market’s forecast of $0.04.
Twitter’s user statistics continue to disappoint the market. During the quarter, average monthly active users grew 15% over the year to 316 million. Sequentially, that number grew a modest 8 million. Mobile monthly active users accounted for 80% of the total users.
For the current quarter, Twitter projected revenues of $545 million-$560 million with an EBITDA of $110 million-$115 million. The market was looking for revenues of $556 million. For the full year, they projected revenues of $2.2 billion-$2.27 billion with an EBITDA of $520 million-$540 million. The Street had forecast revenues of $2.2 billion.
Twitter’s Increasing Monetization Opportunities
Twitter continued to enhance service offerings that will help them earn more revenues. The company recently added autoplay video to users’ timelines and now they are expanding the service to include video app installs. Known as the video app card, the service will offer to marketers the capability to showcase apps within video ads to drive installs. Twitter is hopeful that videos that will play automatically will improve conversion rates for developers, thus helping in improving ad revenues for Twitter.
They also released new options for marketers to better marketing costs. The recently introduced optimized action bidding tool allows advertisers to bid for advertising space by stating the amount that they would pay for each app install. Advertisers can also use the cost-per-install bidding tool that will allow them to pay only after a user installs an advertised app instead of payment expected for every ad click. Analysts believe that while these new tools may be beneficial to advertisers, they may end up backfiring for Twitter. Twitter’s new tools will be available to existing app developers as well and unless Twitter is able to ensure that they attract new app developers, they could end up seeing lower revenues as existing developers shift to these lower costing options.
They are also working on a tool that will let advertisers look at a calendar, choose an event, and drilldown into the details of the event to figure out target demographics. Right now, advertisers have to manually create ads based on Twitter hashtags. The new feature will simplify this process for advertisers and help them reach a wider audience.
Twitter’s User Focus
Twitter is also working on ensuring that their users remain engaged. Earlier this month, they released a new feature that highlights tweets from news publishers. The new feature displays a small card-like window on the page that includes an image and a brief summary of news stories. The move was in reaction to recent reports that revealed that 63% of social media users use social media sites like Facebook and Twitter as their source of news. By adding the images, Twitter will be able to direct these users to the publishers’ websites.
The market is also waiting for the release of Project Lightning, which will make it easier for the users to tune into a particular event and watch videos and read Tweets about live events.
Twitter’s stock is trading at $31.24 with a market capitalization of $20.98 billion. It touched a high of $55.99 in October last year.