The plan of Twitter Inc. (NYSE: TWTR) to improve revenues from video advertising will take longer than what market analysts had anticipated. This video advertising push can be considered as a major part of the revival effort of Chief Executive Officer Jack Dorsey.
The micro-blogging giant is including more video from its Periscope application and other sources in the timelines of the users. However, on Tuesday, Twitter stated that its sales for the third quarter will be substantially lower in comparison to the analysts’ forecast, partly because ad revenues from those videos have not kicked in yet. This pushed TWTR shares lower by over 13 percent in early trading hours on Wednesday—the most since April.
According to the micro-blogging company, it will take time to unlock video ad budgets since Twitter has not yet finished developing the technology that advertisers need. The company said that it still has to build an accurate measure for the verification of who viewed the video ads, together with tools that aid advertisers select audiences and time their campaigns. Twitter also said that updates will be implemented “over the next few quarters”.
According to Monness, Crespi, Hardt Co. analyst Hames Cakmak, “Playing catch-up for video is no easy feat, especially when you consider the resources deployed by Snapchat, Facebook and YouTube.”
The micro-blogging company has deals in order to stream more sports, entertainment, and political videos on its service and intends to share the revenue from related ads with its partners. This kind of deals will quickly generate revenue since advertisers will purchase commercials for that content the way they typically do. However, the Chief Financial Officer Anthony Noto stated that this will not begin until the end of the Q3.
Noto pointed out that the anticipated slowdown in the growth in revenue for the Q3 is “a function of demand”.
“We want to tap into new budgets. We haven’t done that, and it’s going to take a while,” Twitter’s Chief Financial Officer added.
This video advertising push is important as the micro-blogging company has struggled to grow advertiser budgets for its social media advertisement. Normally, videos typically come from a different part of the budget of advertisers, and they are also willing to pay higher rates for this type of advertisements.
According to Chief Operating Officer Adam Bain, “The demand we’re seeing is unique in that it’s coming from the online video parts of the house.”
The existing ads of Twitter Inc have higher rates in comparison to the ads of other competitors. This has proven to be an obstacle for the company’s efforts to boost the micro-blogging company’s share of social media marketing budgets.
Executives also stated during the earnings call that Twitter already has all the huge advertisers in the United States and it now has to get these advertisers to spend more.
Bloomberg analyst Jitendra Waral said, “This all points to ad pricing going down from now on, which is not good.”
“There will be a reduction in long-term growth expectations,” Waral further added.