Earlier this year, Facebook (NASDAQ:FB) launched a program called the Creative Accelerator. It's designed to help brands tell their stories in high growth international markets. It allows brands to consult with Facebook's Creative Shop to find out what works and what doesn't in markets with huge potential for growth.
Last week, Facebook released some data on its early results with Creative Accelerator partners. The results have been promising with ad recall, brand awareness, and purchase intent all increasing compared to similar campaigns.
Educating and attracting more brand dollars has been a focus of Facebook's this year. Meanwhile, Twitter (NYSE:TWTR) -- which makes the majority of its ad revenue from direct sales to big brands -- has shown signs of struggle to retain ad spend from those large companies. Twitter's challenges have now culminated in Dick Costolo stepping down as CEO. Twitter could take a tip from Facebook and actually work with brands to create better ads on its platform.
The state of advertising at Twitter
Last quarter, Twitter stated that total advertisers increased at a similar rate to its fourth quarter, when it posted excellent results. However, the ad spend failed to live up to expectations. Twitter blamed a poor response to its direct response advertising, saying advertisers balked at the higher pricing involved with delivering a specific action versus any type of engagement.
However, direct response advertisers know very well how much a certain action is worth to them. For example, app-install advertisers know how much an install is worth on average, and can easily make conclusions as to how much someone clicking to learn more about its app in the app store is worth to them.
The real problem seems to be with brand advertisers, which still accounts for the majority of Twitter's ad revenue. While brand advertising revenue grew more on an absolute basis compared to direct response, it grew more slowly than direct-response ads last quarter. With options like Snapchat and Instagram -- which both skew younger -- growing rapidly, some ad spend from big brands may be shifting to other platforms even though Twitter can still count them as advertisers.
Create value added services
For Twitter to continue growing its brand advertising revenue, it ought to provide value added services for brands that spend above a certain threshold. Something like the Creative Accelerator that Facebook offers. Nobody knows more about what works on Twitter than Twitter, so it's in a unique position to help create ad campaigns that convert.
Twitter is working to provide as much data as it can to advertisers. Last month, the company introduced Audience Insights, which provides advertisers with all sorts of data on their followers. The aim is to help businesses craft a message that resonates with users like the people that already follow them. It's also working with Google's DoubleClick Bid Manager to provide more conversion tracking data in relation to other digital ad campaigns.
The problem with simply providing additional data for businesses is that Twitter is relying on the businesses to take action themselves. Additionally, the data it can provide is unique to each business, whereas Twitter is able to access data for a business' competitors or partners to help figure out what works.
Instagram is now one of Twitter's biggest threats
Twitter needs to do everything it can to grow its brand advertising revenue, especially in light of recent developments at Instagram. Instagram's user base surpassed Twitter's last December, beating it to the 300 million user mark. And earlier this month, Instagram announced new ad formats and plans to expand its advertiser base and targeting capabilities.
With a larger audience that skews younger and targeting data from Facebook, Instagram presents a valuable platform for brand advertisers. There's still some time for Twitter to fight back, but it needs to offer something more to brand advertisers than just 302 million active users.
Providing a service like Creative Accelerator for advertisers that reach a minimum spending level, will encourage brands to grow or maintain their ad spend, assuming Twitter can deliver results.
Adam Levy owns shares of Apple. The Motley Fool recommends Apple, Coca-Cola, Facebook, Google (A shares), Google (C shares), and Twitter. The Motley Fool owns shares of Apple, Facebook, Google (A shares), Google (C shares), and Twitter and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. 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.