TWTR Stock — Can Twitter Raise Profitability With New Ad Idea?

by Burke Speaker | November 15, 2013 10:07 am

TWTR Stock — Can Twitter Raise Profitability With New Ad Idea?

Like YouTube before it, Twitter (TWTR[1]) is now adding double ads on its site in an effort to turn a profit and appease investors who are hoping TWTR stock turns out much better than Facebook (FB[2]) did.

Variety is reporting that American Express and Fox[3] have partnered with Twitter and new ads will incorporate the credit card company’s ads in front of clips of Fox shows.

Already, Twitter’s Amplify program[4] allows TV networks to push ad content into users’ feeds with programming clips from shows they might have interest in.

However, the new ad promotion aims to double the ad exposure.

This new ads-on-top-of-ads idea is already used in YouTube, so Twitter execs hope the move will pay off.

And pay off is the name of the game with TWTR, which is currently not profitable.[5] According to its own filings, Twitter lost nearly $70 million in the first six months of 2013.

As ValleyWag[6] reported, the company has never been profitable, though “revenues were $28 million in 2010, and $316 million last year. That’s a big jump, but doesn’t negate the fact that this business doesn’t turn a profit.”

As a number of media sites have already pointed out, Twitter’s scramble for partnerships look like a smart move to raise TWTR stock prices, but may not pay off (via Gawker).

Their Nielsen partnership to measure a show’s chatter on social media is, in theory, excellent.

However, Nielsen has been proven time and again to provide slightly irrelevant data, and given that the Twitter ratings only take into account mentions, with no separation between positive and negative tweets, their Twitter ratings provide a false metric at best.

Comcast partnership was even worse—a “See It” button was getting added to promoted tweets to allow Comcast customers to navigate away from Twitter and watch ads on their set top boxes. There’s nothing like a second screen to provide you a third screen, all while distracting you away from your first screen.

The real test will be how Twitter users respond. Putting ads and other content you don’t want into your feed is a good way to turn off users.

Or as with many online ad models, users learn quickly how to ignore ads — which will eventually create a drag on TWTR’s future.

TWTR is down 1% since its launch.

Endnotes:
  1. TWTR: http://studio-5.financialcontent.com/investplace/quote?Symbol=TWTR
  2. FB: http://studio-5.financialcontent.com/investplace/quote?Symbol=FB
  3. American Express and Fox: http://variety.com/2013/tv/news/fox-american-express-take-to-twitter-to-promote-sharing-of-tv-show-clips-1200832450/
  4. Amplify program: http://www.theatlantic.com/business/archive/2013/10/why-facebook-and-twitter-are-fighting-over-your-television/280339/
  5. which is currently not profitable.: http://valleywag.gawker.com/twitter-just-revealed-its-ipo-1440852830/@sambiddle
  6. ValleyWag: http://valleywag.gawker.com/twitter-just-revealed-its-ipo-1440852830/@sambiddle

Source URL: http://investorplace.com/2013/11/twtr-stock-can-twitter-raise-profitability-new-ad-idea/
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