In 2015, Twitter (NYSE:TWTR) made a couple of key acquisitions that have had a major impact on the company and could play an even bigger role in the future.
The first one -- Periscope -- most people have heard about. The live-streaming platform has quickly gained momentum since launching, and Twitter has taken steps to integrate it with its flagship platform.
The second acquisition actually cost Twitter quite a bit more, and a lot fewer people have heard about it. TellApart is an ad technology company Twitter ended up paying about half a billion dollars to purchase. TellApart technology powers the retargeting ads on the Twitter Audience Platform, and the company recently integrated it into native Twitter ads with Dynamic Product Ads.Both of those are key parts of Twitter's plans to grow its revenue.
Twitter's new live streaming business
Twitter has big plans to bring more live streaming to its flagship platform. The company struck a deal with the NFL to stream 10 Thursday Night Football games, and it's in talks with the NBA and MLS to stream some of their games as well. Twitter also has deals in place to stream the Republican and Democratic National Conventions as well as live programming from Bloomberg.
Along with the video streaming rights, Twitter is getting some of the advertising spots during the events. It says that ad sales for the NFL games are going better than expected, and that's why it has started investing in more live content.
Facebook, too, is investing in live content, paying publishers and celebrities directly in exchange for commitments to live stream a certain amount. Twitter is differentiating itself by buying content that typically airs on television, while Facebook's streams will be more like other web content. That differentiating factor could drive an audience to Twitter's app and website.
Periscope is a key part of Twitter's new live-streaming business. Its technology is what's powering Twitter, and Periscope CEO Kayvon Beykpour appears to be heading up the company's efforts to buy up more content.
Twitter is also using Periscope as a creative way for marketers to advertise on Twitter by promoting live streams, but it has yet to allow marketers to advertise in the Periscope app itself. Nonetheless, Periscope is key to Twitter's strategy going forward.
Advertising that actually works
Just as important, if not more so, is the ad targeting that Twitter does when it gets web users to tune into its new live streaming content. To that end, TellApart has been (and will be) key.
Last year, the majority of TellApart's impact came in the form of revenue from advertising on third-party apps and websites through Twitter's Audience Platform. Twitter's ad network revenue accounted for 38% of the company's ad revenue growth during the first quarter of this year, indicating that it's of growing importance to the company's top line.
The ability for TellApart to retarget users across devices and across apps that use Twitter's ad network is key to maximizing the company's revenue from third-party publishers. It's important to note that Twitter has to split this ad revenue with app and website publishers, whereas it gets to keep 100% of the ad revenue from its owned and operated properties.
Twitter is now using TellApart's technology in Dynamic Product Ads on its own platform. DPAs allow retailers to show users items they've previously viewed on their own website, and they've shown higher click-through rates and conversion rates. That means Twitter should be able to increase ad prices as they become a bigger part of its ad business.
Twitter sees DPAs as particularly valuable in capitalizing on its logged-out audience, which it expects to grow with the introduction of its live streaming events. Twitter has touted its logged-out audience for some time now but has yet to produce meaningful revenue from the additional 500 million people that it says visit its properties but don't log in. Additional live streaming content powered by Periscope and TellApart's ad technology will be key to increasing engagement from that audience and then finally monetizing them.
Twitter has the technology and a few content deals in place. The question remains if it can execute.
Adam Levy has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook and Twitter. 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.