Here’s Why Videos Can Drive Revenues For Twitter Over The Long Term
Recently, Twitter (NYSE:TWTR) started testing a new section on its platform called “top videos for you” – a compilation of videos that the user might be interested in viewing. These videos play automatically as the user hovers over them, without sound. This test comes after Twitter shut down its Vine video service and incorporated the Periscope software in the Twitter app to allow live video broadcast directly through this app. Twitter is consolidating its offerings and increasing focus on videos to compete better with Facebook. While the company reported disappointing results for Q4 with revenue and user growth slowing, publishers are witnessing a meaningful increase in video views on Twitter. Business Insider and its two sister publications attracted more than 6 million video views on Twitter in January, a significant increase from the 1 million number six months ago. Similarly, Mashable’s video views on Twitter have quadrupled in the past four months. While these views are still much lower compared to Facebook, publishers are able to generate revenues on Twitter’s platform immediately, if they are part of the Twitter amplify program. This incentivizes publishers to continue uploading videos on Twitter, despite its lower user base. With a new section dedicated to videos, Twitter might be able to increase these views at a rapid pace.
See our complete analysis for Twitter
Live Streaming, Established Revenue Model Attracting Publishers
Twitter’s amplify program allows media companies to sell and run pre-roll ads on their videos. This ensures that the videos are monetized from the time they are uploaded on Twitter’s platform. Facebook is currently testing a mid-roll ad format and a 55-45% revenue sharing model with publishers, but does not have an established revenue generating model. Twitter is in an advantageous position given its established revenue model, but its lower user base acts as a dampener. The company is focusing on news and live videos to differentiate itself from other players. Bloomberg already streams two of its weekly live TV shows on Twitter and is likely to bring more shows to its platform in future. Twitter can enter into similar arrangements with other players to bring more live content to its platform which is news-based or covers popular events.
Lack Of Scale, Lower User Base Key Challenge
Twitter’s biggest challenge in attracting more publishers to its platform is its significantly lower user base compared to Facebook. As Facebook increases focus on videos and adopts a monetization model which is similar to Twitter and YouTube, publishers are likely to be attracted to its platform, given its large user base and engagement levels leading to higher views. However, Twitter is working on ways to increase its videos views and new feature “top videos for you” can potentially engage viewers better. Increasing its user base might be a more difficult challenge to solve, but if the company is able to engage its existing users better, it can attract more publishers to its platform.
We expect a steady increase in Twitter’s U.S. and international monthly average users over our forecast period
However, with significant competition from players such as Snap and Facebook, it would be challenging for Twitter to grow users at a rapid pace.
Twitter is focusing on consolidating its products and making its platform the go-to place for news and live events. Video consumption among users is increasing at an exponential pace and advertisers are allocating an increasing proportion of marketing budgets to videos on social media platforms. Twitter has an established program for publishers to monetize videos on its platform. If the company is able to focus on increasing user engagement and this leads to a significant increase in video views, it can drive revenues from both live and published videos on its platform over the long term.
View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap