Following Facebook's (NASDAQ:FB) lead, Twitter (NYSE:TWTR) introduced autoplay videos in users timelines last week. Facebook has successfully leveraged autoplay videos into 4 billion views per day. Twitter hopes it can replicate those results with its audience. If so, it could have a big impact on how much advertisers spend on video ads.
With autoplay video, Twitter will count videos as viewed after 3 seconds of play when the video is in full view. That means Twitter could soon be notching many more views as videos begin autoplaying in users' timelines. That sounds great for Twitter's potential to increase ad revenue, since it will count more impressions, but it could have negative consequences as well.
Unlike Twitter's new direct-response advertisements, which charge based on specific actions a user takes, video ads are meant more for branded advertising, charging per view. By changing the definition of what constitutes a view, it changes how much an advertiser is willing to pay for video ads. If views are being counted from users who aren't actually watching the video, those views aren't worth anything to advertisers and must be accounted for in their bids.
To quell advertisers' worries, Twitter published a few statistics from its early experiments with autoplay videos. The company says users are two-and-a-half times more likely to prefer autoplay videos over other viewing methods. Additionally, autoplay videos lifted video recall by 14% over other video formats and increased completions by seven times.
However, it's unclear what exactly Twitter is measuring against. Those numbers simply don't make sense when compared to people who voluntarily click play on a promoted video. More likely, Twitter is comparing its test with all users who saw a promoted video in their timeline, whether they clicked play or not.
That's a key distinction because, previously, Twitter didn't charge to place a promoted video in a user's timeline. It only charged advertisers when a user clicked play. Now that there's no click-to-play mechanism, the value of a view has likely decreased.
What about the value of promoting video in general?
It's worth noting, however, that Twitter's data show that many of those automated views aren't completely worthless. That 14% increase in video recall is certainly worth something.
As mentioned, video ads are currently targeted at brand advertising. And brand advertising isn't about direct sales, it's about establishing product awareness and telling stories to promote a company. A 14% increase in users who can remember a few things about the video they saw, even if it played automatically and had no sound, is significant enough that it could convince some advertisers to spend more overall despite spending less per view.
Without explicitly stating so, Twitter seems to be struggling to maintain ad spending by some of its brand advertisers. This might be due to other social networks like Facebook's Instagram or Snapchat growing audiences at much faster rates than Twitter, providing better potential reach. Autoplay videos could help stave off that exodus in branded ad dollars by unlocking a larger portion of Twitter's user base.
Last quarter, Twitter did a poor job of setting expectations, missing its projected revenue outlook. The company adjusted its outlook for the full year last quarter after its direct-response advertisements fell short of expectations. Obviously, Twitter believes its latest moves will have a long-term positive impact on its advertising revenue, but it's unclear how that will play out in the short term.
The benefits might only come from an increase in users viewing videos, making them more receptive to video advertisements. That seems to be Facebook's strategy with promoted videos, and it's certainly a long-term strategy (just like everything Facebook does). With Dick Costolo out as Twitter CEO starting next month, management might receive a longer leash to show results before analysts start punishing it. Still, don't be surprised if those results don't show up immediately.
Adam Levy owns shares of Apple. The Motley Fool recommends Apple, Facebook, and Twitter. The Motley Fool owns shares of Apple, 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.
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