NFL is a Big Deal for TWTR Stock
Twitter Inc (NYSE:TWTR) is hoping to broaden its user numbers, with the National Football League (NFL) tweeting 10 matches every Thursday night during the season. Few had thought of linking the famous microblogging site to the NFL, but Twitter stock has gained 1.3% since. More significantly, as far as trend is concerned, TWTR stock has increased about 5.6% in the past five days.
Of course, TWTR stock has not moved much beyond a $17.00 range. With few exceptions, such as the March peak of $19.36, Twitter stock has not had an especially stellar year, considering the stock was trading comfortably above $48.00 a year ago. Twitter stock has also suffered from the pressure of talent loss. Four top executives, all of them vice presidents, pulled Houdini-like disappearance acts and quit the company.
This does not necessarily mean that investors should follow suit and abandon the Twitter ship. Unlike in 2015 when Twitter was mulling over its very reason for being, even going as far as proposing a much higher character limit, this year, the company is more sure of itself.
The NFL has power. By associating with it, Twitter will share visibility in one of the few last remaining bastions of traditional television—even as it contributes to its erosion. Both Twitter and the NFL need advertising revenue and audience. Together, they can explore ways to increase both.
Through Twitter, the NFL—popular in the U.S. but much less so outside of it—gains a worldwide audience. According to Re/code, the social network secured the NFL rights for less than $10.0 million. Also according to Re/code, Twitter’s bid prevailed even as its rivals for the NFL contract offered more than $15.0 million each. Indeed, Amazon.com was a candidate for the acquisition of the Thursday night NFL rights.
Twitter also beat none other than the granddaddy of all social media: Facebook itself. Anonymous sources told CNBC that the NFL has a poor monetization model. The NFL liked Facebook’s large audience and “Live” platform. However, it wasn’t as keen on how Facebook would generate revenue from live streaming. Meanwhile, the league felt Twitter’s product is ready for primetime. (Source: “Why the NFL went to twitter instead of Facebook,” CNBC, April 6, 2016.)
Moreover, the microblogging site has acquired popularity among football fans. The fans chat, or tweet, during the matches. This means Twitter can boost traffic and finally exceed the 320 million active subscribers, exactly the same level as three months earlier. Moreover, the fans who like to tweet can now watch and tweet at the same time. (Source: Ibid.)
The NFL deal and the motivations that led the league’s officials to pick Twitter are certainly optimistic for the site. Other sports leagues or entertainment networks may follow suit, applying a similar logic, to help Twitter boost audience and advertising.
Meanwhile, the NFL deal comes, as CEO Jack Dorsey is freer to take executive decisions. TWTR shareholders should appreciate his crucial decision to keep the 140-character limit that Twitter had imposed for 10 years. (Source: “Jack Dorsey on Twitter’s 140-Character Limit: ‘It’s Staying’,” Inverse, March 18, 2016.)
This ends speculation and, frankly, maintains Twitter’s unique brand or identity. The restriction actually encourages creativity and user growth more than the higher limit alternative. Perhaps Twitter had lost its way, and Twitter stock its value, because the company was chasing Facebook instead of building its own brand.
Twitter is reborn thanks to the affirmation of the 140-character limit. It inspires creativity, as Dorsey hinted. (Source: Ibid.) Twitter is an art and treating it as such will help grow the user base and the value of TWTR stock. Twitter’s CEO is certainly under pressure, but he also has a clear path ahead and a strong mandate.
Having surpassed its identity crisis, Twitter can attract more advertisers. The NFL deal is just the latest effort in this sense. In the most recent quarter, advertising revenue accounted for more than 90% of the company’s total revenue. (Source: “Twitter Q4 and Fiscal Year 2015 Shareholder Letter,” Twitter Inc., February 10, 2016.)
As an advertising platform, Twitter is already winning over both advertisers and consumers, improving monetization. In the most recent quarter, advertising revenue surged 48% year-over-year to $641 million. (Source: “Twitter’s Ad Revenues Surge Despite Flat User Growth,” Market Realist, February 12, 2016.)