Promoted Moments Could Boost TWTR Stock
It hasn’t been a great year for Twitter, Inc. (NYSE:TWTR) investors. The TWTR stock price lost more than 28% in less than 11 months. However, the company is finding new ways to spark growth. With its co-founder Jack Dorsey back to help, Twitter’s stock price could be on its way to recovery.
Under a lot of growth pressure, Twitter “unfollowed” its former CEO Dick Costolo and brought back its co-founder Jack Dorsey to lead the company. As a man with an entrepreneurial spirit, Dorsey is bringing a lot of changes that could drive growth for Twitter and reward TWTR stock investors.
Twitter: More Sources of Advertising Revenue
In late October, the company started a new native ad format called “Promoted Moments.” “Moments” is Twitter’s newest feature, which can track big events as they happen. Under the new ad format Promoted Moments, advertisers are given a channel on Moments for 24 hours and can create content of their own.
Matt Derella, Twitter’s vice president of revenue for North America, said, “Promoted Moments will have all the features of a Moment you see right now, and instead of curators creating the moment, it’ll be a brand. The real estate they get is going to be really prominently displayed.” (Source: “Twitter Rolls Out Advertising on New ‘Moments’ Feature,” Bloomberg, last accessed November 27, 2015.)
The neat thing with Promoted Moments is that it fits nicely with the other content, consistent with the trend of native advertising. Nowadays, Internet users are increasingly aware of ads, so having an ad that looks just like other content and won’t get ignored easily is crucial for Twitter. Compared to promoted tweets that Twitter is already doing, Promoted Moments allows advertisers to include more photos and videos to tell a comprehensive story.
Mind you, even though everyone was talking about Twitter’s growth problem, the company’s report card wasn’t that bad. In the most recent quarter, Twitter grew its revenue by 57.6% year-over-year, hitting $569 million. (Source: “Twitter Reports Third Quarter 2015 Results,” Twitter, Inc., last accessed November 27, 2015.)
Sure, that still might not be good enough to whet investors’ appetites, but guess what? TWTR stock’s growth was better than Facebook Inc.’s (NASDAQ:FB) and LinkedIn Corporation’s (NYSE:LNKD), which in the third quarter, grew their top lines by 40.5% and 37.3% year-over-year, respectively.
In the future, Twitter’s financials could also get a boost from its acquisition of Periscope. The live-streaming app was first launched on “iOS” devices this March, with the “Android” version following in May. Growth was nothing less than phenomenal for Periscope; the app managed to attract 10 million registered users in four months after launch. Note that Periscope is not generating any revenue for Twitter just yet, but if Twitter manages to monetize the fast-growing app, the company’s stock price could get a solid boost.
At the end of the day, user experience matters for a product. On that front, the company is not standing still. Recently, Twitter launched native video support for “Twitter Kit” in an effort to improve user experience. Users can now watch full-screen Twitter videos and GIFs without leaving the app or having to open up another window. The feature is currently available for Twitter Kit running on “iOS 8” or later and will be available for Android soon. (Source: “Launching Native Video Support for Twitter Kit,” Twitter blog, November 27, 2015.)
The Bottom Line on TWTR Stock
Note that right now, Twitter is going hard on research and development. In the third quarter, the company spent 36.6% of revenue on R&D. Continued innovation is necessary in the social network business, but heavy research spending could put pressure on Twitter’s bottom line in the short term. Nevertheless, if the company manages to get back on its growth path, shares of TWTR stock price could start to move higher.