Twitter, as we all know, has been facing the problem of user growth for the last couple of years, but it now has one more problem, which is advertisers, says Re/code. A few days ago, the micro-blogging firm acknowledged that brand advertising was “softer than expected.”
Both problems are related
Twitter’s new problem is not a one-quarter problem, but rather, the problem has been brewing for a while. First its user growth stalled, and then its ad sales growth stalled as well. Its sales growth has been decreasing for a while even though the micro-blogging firm generated $2.2 billion in revenue last year.
In a chart, MoffettNathanson analyst Michael Nathanson explains this trend pretty clearly. His chart shows that sales on Twitter’s own properties are dropping faster than the rest of Twitter’s revenue, which includes its third-party ad network. This is because brand advertisers are pulling away from the platform faster than direct response advertisers. Direct response advertisers are the ones who buy app-install ads and other “click now” ads.
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So it is quite clear that due to the user growth problem, the company is now facing an advertiser problem. The micro-blogging site does not have enough scale to compete with rivals Facebook and Google.
How does Twitter plan to solve this problem?
For some time, the ad growth issue did not matter much as Twitter and its ad boss Adam Bain did a good job in courting big ad agencies and brand advertisers that spend their money.
“They got them to take a flier on Twitter,” Re/code said.
But what changed now is that the micro-blogging giant is not novel anymore, and the brands or agencies that want to spend their money on new social media platforms have multiple options. Twitter, after confessing that it has an advertiser problem, promised to make things better. The social media platform is hoping to solve the problem by the fall, if not right away.
So how does Twitter plan to address the issue? Like everyone else on the web, the micro-blogging site has the same answer to the problem: “We will fix it with video.” The micro-blogging giant will convince its advertisers to upgrade their old text + photo Twitter ads to video ads (which will, of course, sell at higher prices).
It does sound like a good idea, but it is the same idea everyone else on the web has, and it is no secret that Twitter has trouble competing with its rivals.