Twitter Inc. (NYSE:TWTR) is set to release its second quarter (Q2 2015) earnings result after market close on July 28. Traders and investors alike will be waiting to see if the firm deserves another chance in the coming quarters or if it is high time to take losses and run. Twitter has been the perfect example of a firm with much promise but little results since its IPO.
The stock has largely underperformed the market, it has found it hard to live up to expectations in revenue and earnings (losses), and its share price is at a 38% discount to its 52-week high of $55.99.
Twitter still has so much to prove to the market with its Q2 results because investors are still seething from the fact that the annual revenue forecast has been reduced by $200M. In its first quarter earnings release, Twitter reduced it full year 2015 revenue expectations from a $2.3B to $2.35B range to $2.17B to $2.27B range.
The reason given for the reduction in 2015 revenue forecasts was the failure of its direct response ads to generate revenue as expected. Twitter recently ousted CEO, Dick Costolo said in the Q1 2015 earnings release that “revenue growth fell slightly short of our expectations due to lower-than-expected contribution from some of our newer direct response products.”
Repackaging Direct Response Ad Products
Yesterday, a Reuters report revealed that Twitter has unveiled three new products for its direct response ads business. One of the new direct response ads products is app install ads, which will provide more measurable results for advertisers.
Before now, most Twitter Ads were images that don’t do a good enough job of conveying the message to the audience. The fact remains that you can’t easily understand what an app does by looking at a picture. Hence, the click through rates for those ads were low and advertisers took their money to other platforms other than Twitter.
With the new direct response ads, advert firms can display how their apps work in a video. The best part is that the ads now have clickable links from which users can download the app after seeing its ad.
The new tool allows ad agencies to demo their apps and it promotes high click through rates by allowing users to download the app while the ad is still fresh in their minds.
More Revenue on the Horizon for Twitter
The main problem that investors have with Twitter is its inability to effectively monetize its platform. The new app ad install tool should make a difference in Twitter’s revenue stream.
It is worthy of note that Twitter is making the new deal friendly to ad agencies. The new deal allows them to choose the kind of user actions for which they’ll pay.
Similar to Google’s new model in which adverts only count when watched for at least 9 seconds – advertisers can choose to pay when a user watches the ad video, clicks on the link, download or install the app being advertised.