When Twitter released its Q4 2014 earnings in January, the majority of the chatter focused on lack of user growth, overshadowing the question of revenue. Like many hugely innovative platforms that have experienced massive growth, generating dollars from their audience has been a real thorn in their side. Despite total revenue of $1.4bn in 2014, the company still operates at a huge loss, and lags behind competitors like Facebook.
I want to explore how Twitter can address this by building out an advertising proposition that capitalizes on the increasing spend going into online video. However, despite being nine years old, Twitter is well behind the curve in creating an irresistible environment for video advertisers.
The trendsetter: Facebook
When you think about social media platforms generating revenue, you think Facebook. The Menlo Park giant pulled in $12.47bn in revenue in 2014. This success has come from continually evolving both its platform and its ad products to enable, accommodate and capitalize on the natural behavior of its users.
In the early days, when the majority of content on Facebook was text, siderail text ads proliferated. The advent of widespread smartphone penetration with good quality cameras turned Facebook into a rich, visual platform, and just as users like bigger, better, richer formats, so too do advertisers. Facebook capitalized on this by moving ads into the newsfeed, these formats mirrored user-generated content in presentation and gave brands a prominent medium for reaching audiences.
At this point users weren’t just producing content on smartphones and tablets, they were consuming it on these devices too. Moving ads into the newsfeed futureproofed Facebook’s ad products against the shift to the smaller screen, where the newsfeed takes up the majority of real-estate. The bet paid off, and mobile ad revenue constituted 68% of the company’s total in 2014.
Over the last year or two the popularity of video has exploded, and Facebook has been ahead of the curve in removing barriers to users sharing and watching video on its platform. In doing so, it has successfully removed barriers to advertiser investment in Facebook as a video advertising channel.
Facebook’s progressiveness in creating a platform for rich UGC content has enabled it to drive significant revenue from richer and richer creative, and other social media platforms are desperately trying to catch up.
Snapchat for instance, is making a serious play to move beyond photo sharing and make video a natural part of its platform. Its Discover product lets brands (for a $750,000 price tag) push video content out to users, but is doing so carefully. As a stepping stone to increasing the prevalence of video ads, Snapchat is primarily populating Discover with video content from media partners and celebrities.
This achieves two objectives: One, it gives users a reason to open the app every day, and two, it makes video a normal part of the Snapchat content experience. This is a clear example of a platform normalising richer formats with its users before making them available to advertisers.
Twitter however, is playing catch up. Users have been able to share video from other sources like YouTube on the platform for a long time, but it’s never had its own native video player, enabling users to record, tweet and play within feeds. That native solution, which materialised in Twitter’s Shoot and Share product in January of this year, has been long overdue and brings the platform a big step closer to making video a natural part of its content environment.
Then you’ve got their recent run-in with Meerkat, the hot startup which scaled massively with the simple premise of letting users live stream video from their smartphones. Twitter recently acquired Meerkat-rival Periscope, and removed the former’s access to its social graph, cutting a core piece of usability from its feature list. Meerkat and its relationship with Twitter has got a lot of coverage over the last couple of weeks, but it’s clear Twitter knows it needs users to be shooting, sharing and streaming video on its own platform.
Twitter has known it is behind the curve in turning its social media network into a video platform for some time. Its acquisition of Vine in 2012 (overshadowed by Video on Instagram), the January 2015 release of Shoot and Share and the current Meerkat/Periscope story all illustrate this.
Facebook has shown how iterating a platform alongside, or even ahead of, the natural evolution of user behavior, can lead to huge revenues. The big question is whether Twitter can catch up in the creation of a compelling platform for video advertising, especially at a time when every social media network is bent on the same objective. Unless it makes strides soon, the video advertising opportunity might just slip away.