Twitter Inc. (NYSE:TWTR) Battles Facebook Inc. (NASDAQ:FB)Date Published: 2016-08-30
Author: Ophir Gottlieb
CNBC's Julia Boorstin broke a story that Twitter Inc. (NYSE:TWTR) will be sharing revenue with its video content providers much like Facebook Inc. (NASDAQ:FB) in an effort to raise engagement, revenue and one more thing that no one is talking about.
According to CNBC, Twitter will be paying a 70-30 advertising split with users it pre-qualifies that share video. That's a much more generous offer than both Facebook Inc. (NASDAQ:FB) and Alphabet Inc. (NASDAQ:GOOGL) pay.
The obvious benefit is to increase engagement and incentivize video sharing. Here's who Twitter is going after:
But this idea is rather shrewd and works very well for both Facebook and Twitter in a non-obvious way as well.
SMART, FOR A DIFFERENT REASON
There are only so many ads that Twitter and Facebook can shove in front of users' faces before it gets overwhelming. When we start hearing the phrase 'ad load,' we know we're talking about that exact phenomenon. Ad load is a problem for Facebook as well, but in our dossier "Facebook has an Embarrassment of Riches," we note that the company has not just Facebook proper, but also Instagram, WhatsApp and Facebook Messenger to build out more ads serves, so it's less of an issue for Facebook, right now.
Twitter on the other hand, has fewer properties, and since Periscope is not monetized yet, it really just has one monetized platform -- Twitter proper. Now, here's where this revenue sharing is so clever.
Instead of Twitter and Facebook stuffing timelines with as many ads as possible without hurting the service, or, instead of the firms seeking content to expand the ad fill, now they rely on users. It's magical, if you think about it.
Twitter's move creates ad revenue opportunities without increasing ad load. The more sponsored video tweets, the more room for ads. Twitter has effectively increased the advertising real estate it has with little effort. Even better, it also increases engagement, which increases ad rates. Facebook too, has discovered this clever move and is already doing it. But Twitter is behind.
TWITTER IS BEHIND
As CNBC points out, Facebook and Google are way ahead.
VIDEO IS EVERYTHING
It's becoming rather apparent that video is everything: the present and the future. The engagement rates for live video are staggeringly high compared to non-video, or even non-live video content. Twitter revealed that video was the largest piece of revenue last quarter, which is especially meaningful given that the company didn't even have the video monetization product just one year ago. Facebook claims 10 billion video views a day.
The author is long shares of Twitter Inc. (NYSE:TWTR) and has no position in Facebook Inc. (NASDAQ:FB).
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