The Two Words That Will Turn Twitter Around

Twitter takes a big step in e-commerce.

Jul 2, 2014 at 9:45AM

Twitter (NYSE:TWTR) has been a disappointment for investors outside of a surge in recent weeks, but that can all change if a new marketing tool takes off. Recode is reporting that the social media giant is testing a "Buy Now" button to help companies promote their marketable wares. 

The test was never fully functional -- and Twitter yanked the promoted tweets featuring "Buy Now" buttons -- but it's clearly a smart way for the dot-com tastemaker to regain its Mojo.

Twitter peaked at nearly $75 just weeks after going public at $26 late last year, but it's been a downhill slide through most of this year. It bottomed out just below $30 in May, but it's been moving higher lately as investor sentiment has been rotating back into tech stocks. 

The market turning its back on Twitter since peaking in December may not seem fair. Twitter has lived up to its end of the bargain, surprising the pros with back-to-back profitable quarters when they were bracing for small deficits. The challenge of monetization -- whether it's through expanding the reach of sponsored corporate tweets or providing access to its feeds -- is coming along nicely. Analysts see revenue soaring 91% this year, followed by a 62% surge next year.

However, Twitter naturally needs more than just its Promoted Tweet feature to become a budget item for marketers. It may have exactly that with "Buy Now" buttons that may allow users to complete purchases within the actual Twitter app. Even if that's not the case -- and the "Buy Now" button is just a sponsored graphical badge that links directly to the merchant's site -- it's still going to be huge for Twitter.  

It's been two months since Amazon.com (NASDAQ:AMZN) partnered with Twitter to create and promote the #AmazonCart hashtag that adds items to a Twitter user's Amazon shopping cart, but that's small potatoes. It's not exactly seamless when someone has to initially pre-register through Amazon to link the two sites, and despite the best viral intentions most people probably don't want to broadcast what they're buying. The "Buy Now" button is a no brainer. It's familiar, clear, instant, and private. 

Some folks are hesitant to click on shortened links, but this makes it Twitter-approved and it will also stand out. As "Buy Now" buttons begin to populate Twitter -- with Twitter collecting the tolls along the way -- there will be fewer questions about the site's ability to monetize its traffic beyond the sponsored tweets. 

Naturally it's also quite possible that this never sees the light of day. Twitter tests things all of the time. However, this makes too much sense not to materialize. Twitter's stock needs a boost, and "Buy Now" could very well apply to the beaten down shares themselves if this is the next trick up the dot-com titan's sleeve.

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Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, and Twitter. The Motley Fool owns shares of Amazon.com and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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