Forget New Users. Twitter Needs to Find New Ads

Over the last decade, Twitter has built up as much cultural currency as nearly any company on earth. What it hasnt done, though, is figure out how to make actual money. And as its latest earnings report makes painfully clear, the problems only getting worse.

Thursday, Twitter said it pulled in $638 million in total ad revenue in the quarter—down one percent compared to the same time last year. The root of the decline? Direct-response ads and promoted tweets, the ad formats most at home in Twitter’s fast-scrolling, constantly refreshing stream, are fading. As Facebook and Snapchat can tell you, the present and future of advertising is video. To fully be a part of it, Twitter’s going to have to either fundamentally rethink its platform, or find a new kind of ad future.

The present and future of advertising is video. To be part of it, Twitter has to fundamentally rethink its platform, or find a new ad future.

It’s not that Twitter has ignored video completely. It’s bolstered efforts in that area over the past year, aggressively pushing livestreamed contentlikeBloomberg TVand a handful of exclusive NFL games. Andit’strying to make itslive video service Periscope more relevant, recently broadcastinga live interviewwith NSA whistleblower Edward Snowden.Most importantly, while ad revenue overall was down, video was Twitter’s “single-largest revenue-generating ad format,” according to the company’s earnings.

It hasn’t been enough. Twitter isnt a natural destination for video the way YouTube and Snapchat and Facebooks News Feed are. Video is leaving Twitter behind, and Twitter is losing out on the ad dollarsthat come with it. Now, as itheads into another year as a public companywhose top priority mustbefiguring outhow to turn a profit, it faces the question of whether it can find ways to make money that don’t rely on video—or if it needs to reinvent itself wholesale to become a place where video can thrive.

A full view of today’s earnings doesn’t paint a rosy picture, either. Twitter reported $717 million in revenue for the quarter, missing analysts expectations of $740 million. Itadded only two million monthly active users in the quarter, a growth of about half a percent. On the whole, the company reported a net loss of $167 million in the quarter, and a net loss of $457 million for 2016.

That’s despite almost daily news mentions, fueled by a perpetually tweeting president. Text alone isn’t enough to keep Twitter afloat. Even more troubling is that the company doesn’t seem to know what can. Twitter made multiple references to re-evaluating its revenue product portfolio (read: ad types) in its earnings announcement, saying it’s particularly focused on video and engagement. But Twitter’s intrinsic value to users is still as a fast-moving, news-based feed, a function that’s seemingly at odds with pushing pre-roll ads.

The company’s recent internal upheavals certainly don’t help cement a long-term vision. Twitter cut staff by nine percent last year, and its C-suite was basically a revolving door, with the company most recently losing both itschief operating officer and its chief technology officer. CEO Jack Dorsey runs not one, but two companies as head of both Twitter and the digital payments company Square. And when rumors of an acquisition started to swirl, Twitter stock spiked—only to fall again when those offers fell through, reportedly in part because of the companys weak efforts to curb harassment on its platform. It’s been a whirlwind of uncertainty, and today’s earnings reflect that.

In the meantime, Google has YouTube, still the largest video platform on the internet by far. Snapchat calls itself “a camera company,” with video at the heart of its identity and ad offerings. Facebook has Instagram Stories, and video ads aplenty in its News Feed. And Twitter? Well, it has a feed you check in on when you want to know what’s happening in the world. Maybe there’s a way to monetize just that. If not, it’s going to have to make some serious changes to how people—and advertisers—use it day to day.

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