Twitter Inc. (TWTR +0.00%) COO and CFO Anthony Noto gave investors a lot of information to chew on when he was interviewed at Recode's recent Code Conference. The event is held annually and is an invitation-only event for senior executives in the digital technology ecosystem.
Noto's interview gave a lot of insight into Twitter's strategy and explained the pivot that the company is currently engaged in as it aims to increase the amount of non-user generated video featured on its platform. This is a timely move, as Cisco Systems expects that internet video will grow threefold between 2016 and 2021, and live video will grow by a factor of 15 in that time frame.
Image source: Getty Images.
The big picture
Twitter wants to be all about what is happening now. The company believes at its core are four principles that define every decision it needs to make about its business.
- Fastest: Twitter wants to be known for having the news first.
- Comprehensive selection: Twitter wants the long tail of content and discussion.
- Discussion: A publicly available forum for people to share their views.
- Personalized: Narrow the focus for a user to what the individual is interested in.
Noto made it clear that everything the company does going forward will be geared to improving one or more of the tenets Twitter has defined as its core focus.
The NFL deal helped build awareness of a broader strategy
Last year Twitter paid the NFL $10 million to stream 10 Thursday Night Football games on its platform. This was one tactic in a strategy to demonstrate the platform's capability and gain publicity among its users and the advertising community that Twitter was out to transform itself. At the heart of that transformation would be live video-streaming. By making a deal for television's marquee property -- the NFL -- Twitter told the world it was serious about its plan.
Twitter can demonstrate the power of live video coupled with its platform. In the case of the NFL, it observed tweets created on game nights doubled, tweet impressions tripled, and the non-game related video starts doubled. The NFL increased the overall usage of the platform by increasing user engagement.
Twitter wants to be the gold standard partner
Within nine months, Twitter went from not having a live video-streaming product to having 800 hours of live programming. The company wants to show content creators that Twitter can help the content get to viewers who otherwise would not see it. As an example, in the case of the NFL, Twitter extended the league's reach, as 55% of the viewers were under 25 years old, an important demographic that isn't watching TV the way their parents did.
At this year's NewFronts annual marketing conference, Twitter announced 16 new live shows it would be adding to its platform this year, including a 24-hour digital news network from Bloomberg and 24-hour sports-focused programming from Stadium.
Revenue growth lags audience growth
Twitter's Q1 advertising revenue was down 11% year over year. This is due to a 63% year-over-year price reduction for the cost of each ad impression. The other factor is that budget decisions on where to advertise were made by ad agencies six to nine months ago before Twitter's new video strategy had been rolled out. You can't plan to advertise on something you don't know about.
Twitter's daily active users have shown five quarters of accelerating growth, a fact that may help pull in more ad dollars going forward.
Image source: Twitter.
Advertisers can see the increased size of Twitter's audience as well as the additional engagement it is generating with its users who may be in a hard-to-reach demographic. Couple that with all the new content that will be curated on the site in terms of live events, progress highlights, after-event highlights, and video on demand, and one may begin to see the full scope of potential for Twitter.
Foolish final thought
Before you decide to invest in Twitter, there is an important point to make about its CEO and founder Jack Dorsey. He does not think about Twitter and its strategy in months or years; he thinks about it in terms of decades. So if you're trying to make a quick buck, Twitter is probably not the right investment. On the other hand, if you are playing the long game, this company may be a nice fit for your portfolio.
