What a native Twitter ad looks like in another app. Source: Twitter
After adding just 2 million net new smartphone and Web users in the second quarter, Twitter (TWTR +0.00%) doesn't expect significant user growth in the near future. That means the company is going to have a hard time producing the kind of ad revenue Wall Street is expecting of it. I previously wrote that one option Twitter has is to increase its ad load, as it still sits at one-third of the company's long-term expectations.
Twitter is looking to all of its other options before it does that. Most recently, it announced an expansion and rebranding of its Publisher Network, now called the Twitter Audience Platform. The new platform will extend the reach of more Twitter ads to other apps using Twitter's MoPub platform.
Getting the most out of MoPub
The acquisition of MoPub is once again proving to be one of the best strategic moves in Twitter's short history. The demand-side ad platform gives Twitter access to apps on over 1 billion mobile devices even if Twitter's active user base is only 300 million users.
Utilizing Twitter's existing ad purchasers removes a middleman from the mobile ad chain. Usually MoPub receives ads from other ad networks when a publisher demands an ad for his or her app. With the Twitter Audience Platform, Twitter is that ad network, which means it doesn't have to split the ad money with another party -- it's just Twitter and the publisher.
Twitter's Audience Platform will only extend Twitter ads such as videos, tweets, and app-install ads to existing Twitter users. Twitter believes the existing data it has on its users will allow those ads to outperform most other mobile ads. If that's the case, it will result in a higher price per ad than others on the MoPub platform, which means most publishers will choose those ads to display. That means more money in Twitter's pockets.
It also means more money in the publishers' pockets. That could have a domino effect, which causes more publishers to try MoPub in the hopes that it can average a higher average ad price than their current ad platform.
But it's not the only game in town
Facebook (FB 3.83%) is also notably expanding its advertising beyond its main app. It revamped the Atlas ad platform it bought in 2013, which is capable of tracking ad conversions across devices and in stores using Facebook's user data. Twitter also has cross-device retargeting capabilities with its recent acquisition of TellApart, but it falls short of tracking conversions in brick-and-mortar stores.
What's more, Facebook has about five times as many users and significantly more data on those users than Twitter has on its own. As a result, the Facebook Audience Network is serving up more and better targeted ads than Twitter's new platform.
There's also Google (GOOG 0.58%) (GOOGL 0.42%), whose purchase of AdMob has helped it achieve a 10% share of the U.S. mobile display ad market despite low mobile Web use. However, Twitter, Facebook, and several other mobile ad platforms are expected to grow faster than Google. Twitter could surpass Google to become the second-largest mobile display advertiser within the next three years.
Expanding its native Twitter advertisements beyond its flagship product via MoPub could play a large role in that growth. With Twitter's user growth stagnating around 300 million MAUs, the company will have to look at every option to continue growing revenue. That includes the planned continued expansion of the Twitter Audience Platform to include other objectives beyond video views, tweet engagements, and app installs. Twitter also has monetizable audiences with Vine and Periscope to consider as well.
