Taking a cue from Facebook (NASDAQ: FB), Twitter (NYSE:TWTR) is testing autoplay video features for iOS users. Facebook introduced the feature in 2013, and last quarter the company reported the feature enabled it to play an average of 3 billion videos every day. Twitter hopes to see similar success after introducing a native video capture feature into the app earlier this year, enabling users to upload 30-second videos.
In the test, some users will see complete videos that play automatically from the start while others will see a select 6-second loop play until they hit the play button. The move makes videos catch the eye better and theoretically increases the likelihood users will pay attention. This is yet another step for Twitter as it attempts to move up the value chain of display advertising to video ads.
The value of adding autoplay to video ads
While Twitter will enable autoplay on its user-generated videos (excluding Vines), the real potential to extract value here is from autoplaying video ads. As mentioned, the goal of autoplaying videos is to more effectively draw users' attention and make the decision for them as to whether they're going to play the video. The user is more likely to pay attention to the video and actually click to hear the audio.
That makes video ads more valuable, and Facebook has shown it works.
Last month, a poll conducted by Advertising Age and RBC Capital Markets found that just 9% of advertisers have bought Facebook video ads. However, an additional 54% indicate they're at least somewhat likely to purchase a video ad on Facebook within the next six months. The click-through rate on video ads is steadily increasing at Facebook, too, leading to more ad purchases and higher pricing. RBC earlier in 2014 estimated Facebook would sell $700 million worth of autoplay video ads last year -- that would be half of Twitter's 2014 revenue.
Catching up to Facebook
Facebook has been working on video longer than Twitter, and it has a larger audience than its social medial peer, but Twitter is a viable alternative for advertisers for a couple of reasons.
First, its audience is large and extends beyond its active users. Twitter claims there are 500 million visitors to its website each month who don't log in, and that it reaches an even wider audience through syndication. Earlier this year, Twitter moved to monetize its syndicated audience by placing its ad units within syndicated feeds such as those on Flipboard.
Second, Twitter has excellent potential to provide ads that are better targeted to its users than those on Facebook. What's more, its timeline is one of the best places for users to respond to ads, since it's typically more concentrated with interesting posts than Facebook's News Feed.
If Twitter's efforts in autoplay video are as effective as Facebook's in getting users to view videos and upload their own, Twitter could attract a significant amount of video ad revenue. Not $700 million, mind you, but a considerable amount. Even $100 million of incremental video ad revenue due to autoplay video would account for more than 10% of the growth analysts are looking for in 2015.
Another investment in video
Twitter has been investing heavily in video in the first quarter of the year, including adding the feature enabling users to capture video from within the app. Additionally, it purchased live-streaming company Periscope in January. It also bought Niche, an online talent agency of sorts, which matches up talent on Vine and YouTube with advertisers as an alternative way to monetize its video content.
Twitter is getting more serious about video advertising, and it should. The market for digital video advertising totaled about $6 billion in just the U.S. last year, and it's expected to grow to $7.77 billion this year. Capturing even 1% of the market would make a big difference for Twitter, which generated just $1.25 billion in ad revenue in 2014.
Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Facebook and Twitter. The Motley Fool owns shares of 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.