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Can Live Video Ads Boost Twitter Inc. (TWTR) Revenues?

Twitter Inc (TWTR)

Twitter Inc is spending money on developing a video advertising technology as part of its efforts to boost revenue. The social networking company posted a quarterly revenue of $602 million, missing analysts’ estimates of $607 million for the second quarter. The company’s management said during an earnings call that Twitter sees big advertising opportunities in both video — including live video. In addition to signing deals to stream select National Football League games and Wimbledon, the company is planning to focus on more entertainment, sports and political events. A report published on CNBC suggest that the company’s investments in live video and entertainment aren’t yet paying off for investors.

Twitter Inc (TWTR)

Twitter Content Deals

Twitter believes that live videos can boost the number of monthly active users. “We have become a video centric platform — it’s our number one ad format in terms of revenue. Just a year ago those products did not exist,” Business Insider reported, citing the company’s execs at earnings call.

Twitter also noted that it will take time to “unlock” video ad budgets because it’s still working on advertising technology. The company also has to convince advertisers about its video ads.

“We have more great live-streaming video on the way thanks to new partnerships with 120 Sports, Bloomberg TV, Campus Insiders, Major League Baseball, the National Basketball Association, the National Hockey League, and the Pac-12 Networks, in addition to our partnership with the National Football League,” the company said in a letter to shareholders.

In addition, Twitter Inc said that it acquired Magic Pony to improve its streaming video technology. “Magic Pony’s machine learning and visual processing technology will help us deliver high-quality streaming video at lower bandwidth, improving the watch experience on mobile devices,” the company said a statement.

Share Fell 12% On Disappointed Q2 Earnings

On Tuesday, Twitter’s shares plunged 12% in after-hours trading following the company’s earnings report that disappointed investors. The company’s quarterly sales fell short of expectations. However, the company was able to beat analysts’ estimates for monthly active users in the second quarter.

The social media company reported second-quarter total revenue of $602 million, up 20% year-over-year, missing analysts’ estimates of $607 million. Advertising revenue came in at $535 million, up 18% year-over-year. The number of total monthly active users increased to 313 million for the quarter.

Twitter said there will be a “long-term shift away from desktop video to premium mobile environments. The company said it is “well-positioned to benefit from that shift, and it will take time for marketers to understand the impact of video ads on mobile vs. the alternative.”

According to the social media company, it will take time to “unlock” video ad budgets because it hasn’t finished developing the video ad technology advertisers. The company is working to build a system that can accurately verify who saw video ads and allow advertisers to pick audiences and setup their campaigns.

Updates will happen “over the next few quarters,” Twitter said in a letter to shareholders.

In addition to its struggle to gain new users, Twitter Inc has been hit hard with a string of executives leaving the company. In May, the social media company confirmed the departure of its two key executives.

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