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Twitter Counting on Video to Tweet it Back to Life

Posted on Thursday, Jul 28th 2016

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Twitter’s (NYSE: TWTR) quarterly performance sounds like a broken record. Quarter after quarter, the social media company has failed to meet expectations. Earlier this week, it reported its latest quarter’s results and it was the slowest quarterly revenue growth since it went public.

Twitter’s Financials

Twitter’s Q2 revenues grew 20% over the year to $602 million, falling short of the Street’s forecast of $607 million. EPS of $0.13 was ahead of the market’s projected earnings of $0.09 per share for the quarter. For Twitter, this was the slowest growth it has recorded since it went public back in 2013. The results obviously sent the stock falling. The stock was down 10% in the extended trading session for the day.

By segment, Advertising revenues grew 18% to $535 million with mobile advertising growing, accounting for 89% of the total advertising revenues for the segment. Total ad engagements for the quarter grew 226% over the year while cost per engagement fell 64% over the year. Data licensing and other revenues grew 35% to $67 million.

By region, revenues from US grew 12% to $361 million and international revenues grew 33% to $241 million.

Among operating metrics, average monthly active users (MAUs) grew 3% over the year to 313 million and recorded an increase of 3 million over the previous quarter. Average US MAUs grew 1% to 66 million, compared with 65 million in the previous quarter. Average international MAUs grew 4% to 247 million compared to 245 million in the previous quarter. Mobile MAUs accounted for 82% of total MAUs.

For the current quarter, Twitter projected revenues of $590 million-$610 million, significantly short of the Street’s projections of $681 million.

Twitter’s Video Focus

Twitter realizes that to keep its users engaged and to attract more consumers, it needs to ensure it has a strong content lineup. Of late, it has been expanding its content portfolio by building on the video streaming services. As part of this effort, Twitter signed a deal with the National Basketball Association to stream exclusive content, including a weekly pregame show and Thursday night games on Twitter. It also signed a deal with CBS News to stream the coverage of the Republican and Democratic national conventions. Other such agreements include their tie-ups with 120 Sports, Bloomberg TV, Campus Insiders, Major League Baseball, the National Hockey League, the Pac-12 Networks, and the National Football League.

Twitter is confident that the streaming service will be well liked given that the Tweets on these streams are able to connect the audience more closely. They tested the service during the Wimbledon matches earlier this month.

It is also expanding Periscope and is allowing broadcasts to be played indefinitely. Broadcasters can now embed playable broadcasts on the web and can also benefit from Highlights, a new feature that will automatically create a short trailer of each Periscope replay. Users can thus watch Highlights of their home feed and also catch up on Highlights of previous broadcasts of a profile they are following. Highlights will also be searchable allowing users to get a quick overview of any topic.

As part of the improved integration of Periscope into Twitter, Twitter is now allowing users to go live on Periscope from within the Tweet compose experience in both the iOS and Android apps.

Last month, Twitter also announced the acquisition of Magic Pony, a London-based machine learning and visual processing technology company. The acquisition is expected to have cost Twitter $150 million and will help it improve its machine learning skills and the way it delivers photos and videos across its apps. Twitter hopes to leverage Magic Pony’s capabilities to deliver high-quality streaming video at lower bandwidth, and improve the viewing experience on mobile devices.

An eMarketer report projects the US Digital Video advertising market to double by the year 2019. The shift is expected to be driven by an increased consumption of video on mobile devices. Digital video advertising on mobile devices is expected to grow from $2.78 billion in 2015 to $6.82 billion in 2019 and desktop based video advertising market is projected to grow from $4.69 billion to $7.95 billion for the same period. Twitter is counting on this high growth market as its ticket out of the current situation.

Twitter has tried to get its mojo back by appointing its co-founder Jack Dorsey back in the CEO position. Dorsey has tried to reinvigorate the company by launching features like Moments, but the market’s patience is wearing thin. Disappointing quarterly results, lower member acquisition rates, and a continuously weak outlook does not help it either. Some believe that Twitter may now be a good acquisition target itself. Potential buyers could include the likes of Apple and Alphabet who are yet to make a mark for themselves within the social media segment.

Twitter’s stock is trading at $15.77 with a market capitalization of $11 billion. It touched a 52-week high of $36.67 in July last year and had fallen to a 52-week low of $13.91 in February this year.

Photo Credit: Esther Vargas / Flickr.com

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