Twitter Inc Has the Tools to Grow
Twitter Inc (NYSE:TWTR) has not enjoyed a stellar 2016 so far. Yet, to dismiss Twitter stock based on this common measure of performance—monthly active users—would be a disservice to yourself. Twitter has actually been performing rather well since May. The trend is likely to continue, as the company is taking concrete measures to adapt in order to build its userbase.
Increasing the number of users is a crucial goal for social media companies. Indeed, user numbers are one of the key factors driving the course of Twitter stock. Admittedly, Twitter has disappointed investors, struggling to make sense of its financial model. There were hopes that the return of founder Jack Dorsey as CEO would have brought more users, but almost a year later, Twitter is still struggling.
Twitter, as we have said before, is in the midst of an existential crisis. Twitter stock will perform better when the company emerges from this necessary process, which will determine its character.
Nobody will take Twitter away. It has become a pillar of modern social culture. There are reminders of its value any time a major story breaks out around the world. Twitter allows for the prompt diffusion of stories and related commentary. In that sense, Twitter stock is safe because in the worst-case scenario, some other company will snap it up in an acquisition to enhance or complement their social media penetration.
The desire not to incur the wrath of loyal users has, correctly, kept Twitter’s traditional 140-character count cap—a cultural icon in its own right—in check. However, Twitter, is also evolving—and smartly so. The company is allowing links to be excluded from the 140-character count, for example. Still, Twitter shareholders are getting impatient and the company needs something big.
The social network has yet to find the magic recipe, but it is looking for ways to improve traffic and this week offers a key moment. Twitter has decided it no longer wants to serve as a secondary service for live sports events, major events, and programs and series users watch on their televisions. From Monday, July 18 to Thursday, July 21, the network will step away from its 140-character text and media posts to live broadcast on the U.S. Republican Party convention. It will do the same the following week with the Democratic Party convention.
For Twitter, this is only the beginning. After an initial live streaming test phase at the last Wimbledon tennis tournament, Twitter and Bloomberg have agreed on the specific ways to deliver some of the latter’s programs. (Source: “Twitter Signs Another Live-Streaming Deal, This Time With Bloomberg,” Fortune, July 12, 2016.)
More recently, Twitter signed a live streaming deal with the NBA. (Source: “Twitter Inks NBA Deal for More Exclusive Basketball Video,” Bloomberg, July 19, 2016.) The NBA deal comes a few months after Twitter signed a much-coveted NFL deal. In fact, starting next fall, Twitter will broadcast 10 NFL football matches, by far the most popular sport in the United States, per season. The contract amount is approximately $10.0 million. It’s an important start toward expanding Twitter’s range of services and number of users.
Twitter’s live streams do offer users advantages or benefits. First, its live streams are accessible to all users. This is not the case with TV cable channels, which require, even on the Internet, a cable subscription. However, millions of Americans have migrated to Netflix, Hulu, and other online content providers. They are doing so in increasingly greater numbers, too. Thus, the Twitter streaming platform offers a significant advantage, bringing together live events/ programs and social media, offering both platforms in one place. (Source: Fortune, op cit.)
Twitter wants to increase its audience, which has been stagnant for several quarters. With this many partnerships, it seems that it may have found a solid platform from which to restart this process. The live-stream/social media combination is unique and could be what the company needs to accelerate the growth of its user numbers.
The live event broadcasts should encourage users to simply visit more often; now, they have the programming incentives. Having said that, while a Twitter account will be needed for social media participation and tweeting on the live event streams, those wanting to just watch the stream won’t require an account. This is certainly an incentive to visit Twitter more often.
The context is favorable for generating online revenue because the online video advertising market shows strong growth. It rose by 42% in 2015 in the U.S., according to estimates from an eMarketer study. (Source: “Here’s How Much Advertisers Have Increased Their Digital Video Ad Spending,” Adweek, May 2, 2016.)