Twitter Looks to Video to Increase Advertising Sales
May 01 2016 - 8:00PM
Dow Jones News
For years, Twitter Inc. has struggled with its Main Street
appeal. Now the social-media service also may be losing its Madison
Avenue allure.
Twitter last week badly missed its first-quarter revenue
estimates, attributing the shortfall to big-brand advertisers not
increasing their spending as quickly as expected.
The news was particularly unsettling for Twitter investors. Amid
a list of issues that include stagnant user growth, management
turnover and a muddled product strategy, deep-pocketed brand
advertisers have been a reliable source of cash. Twitter's revenue
growth is expected to shrink to as little as 17% this quarter after
doubling only 18 months ago.
The culprit appears to be Twitter's signature ad product: the
"promoted tweet," which looks like a regular tweet but includes
promotional text, images and links. Brands are moving away from
these ads because they are looking for more immersive advertising
such as video or interactive ads, said James Douglas, executive
director of a social-media agency owned by Interpublic Group.
On the video front, Alphabet Inc.'s YouTube accounts for the
largest share of U.S. video ad dollars at 20%, according to
eMarketer. But Facebook, which started video ads in 2013, is
gaining steam. The social network on Wednesday said ad revenue
jumped 57% in the first quarter, specifically noting videos created
by advertisers as the driver.
"People are sharing and creating nearly three times more video
on Facebook than they were a year ago…This presents a big
opportunity for marketers," said Facebook operating chief Sheryl
Sandberg.
Twitter, too, is betting that video will become its next cash
cow.
The company launched video ads last year that start rolling
while muted as users scroll through their timelines. The company
said advertisers are waiting for Twitter to roll out improved tools
to target users and measure performance. Twitter expects to release
those tools in the fall, around the time it will begin
live-streaming the first of 10 National Football League games.
Under the new NFL deal, Twitter will receive 15 ad slots to sell
commercials during each game. On Tuesday, Twitter said it already
signed up one major marketer to advertise during the livestream.
But for now, many advertisers and agencies say they are looking
elsewhere to park their video dollars.
Twitter is "not yet at the forefront of the video content
conversation and that is where the dollars are," said Shelby
Saville, president of innovation and investment platforms at
Mediavest Spark, an ad-buying firm that works on behalf of
companies such as Morgan Stanley and ConAgra Foods Inc. She pointed
to YouTube, Facebook and Snapchat as places that advertisers are
gravitating to for video ads.
A Twitter spokesman declined to comment beyond the company's
statements during earnings results last Tuesday.
Ramping up its push into video is critical for Twitter.
Digital-video ad spending in the U.S. is expected to grow 28.5%
this year to $9.84 billion, according to eMarketer. Twitter faces
an onslaught of competition in the rush for video ad dollars
because most media companies, publishers and social media platforms
also are gunning for those dollars.
Coldwell Banker Real Estate LLC bought Twitter's promoted video
ads last year, but users didn't "engage" (view, share or comment)
with the ads enough to justify the cost of the marketing effort,
said Sean Blakenship, Coldwell's chief marketing officer. He said
Facebook's video ads outperformed the Twitter spots.
Marketers are willing to pay more for ads on Facebook in
exchange for access to the company's 1.65 billion users and more
sophisticated set of targeting and measurement options.
According to AdParlor, a social-media ad buyer that specializes
in brand advertisers, ads on Facebook cost an average of $5.25 per
1,000 impressions in the U.S., compared with $4.78 on Twitter and
$3.36 on Facebook's Instagram in the first quarter.
Some marketers say they are seeing their investment in
advertising on Twitter pay off and expect to spend more on the
platform this year.
"We're getting tremendous engagement there, and for us we have
yet to see a competitor for Twitter in the area of making
connections during cultural moments," said Lou Paskalis, senior
vice president and enterprise media executive at Bank of America
Corp.
But some of Twitter's big advertisers have pulled back on its
traditional ads.
Beer maker Heineken NV, a frequent advertiser on Twitter, said
it has successfully used promoted tweets and Twitter's short-video
ads to boost its marketing efforts surrounding live events such
as European soccer, music festivals and other sponsorships. Still,
the brewer expects to spend slightly less on Twitter this year
than it did last year.
"You don't want to tweet everything," said Ron Amram, vice
president of media for Heineken USA. "We are experimenting a bit
less and waiting for video."
(END) Dow Jones Newswires
May 01, 2016 20:45 ET (00:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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