Twitter, Inc. (TWTR - Free Report) recently announced that it has signed contracts with several media and entertainment companies to enhance the social media platform with “live-streaming and video highlights.” Some of the prominent names in the partnership include the likes of Sony Music, FOX Sports Asia and VICE.
Twitter expects to increase user engagement with the incorporation of video content. In a recent article, CNBC quoted Kay Madati, the global vice president of content partnerships of Twitter, who stated that by 2020 the company will have a billion views from Asia Pacific for the videos.
Notably, increasing engagement level will benefit the company’s advertisement revenues, which constitute the majority of its total revenues. In second-quarter 2018, revenues of $711 million increased 24% from the year-ago quarter and beat the consensus mark of $700 million.
Improving Advertising Revenues
In the last reported quarter, the company’s Advertising revenues increased 23% year over year to $601.1 million. Owned-and-operated advertising revenues rose 29% to $564 million.
Ad engagements increased 81% year over year. Clickthrough rates (CTR) grew on a year-over-year basis across the majority of ad types as ad relevance continues to improve. Cost per ad engagement was down 32%.
Video ads accounted for more than half of ad revenues and remained Twitter’s fastest-growing ad format. Strength was witnessed in Video Website Cards, Video App Cards, In-Stream pre-roll and mid-roll ads during the quarter.
Growing adoption of video ad products like Video Website Cards & Video App Cards is driving Twitter. To attract small business advertisers, Twitter has started testing a $99 subscription service. With this subscription, Twitter will handle all advertisers’ promoted tweets on the social media site.
Twitter continues to focus on boosting user growth rate and engagement levels by taking various measures like making tweeting easier for people and more expressive. These factors are expected to help in improving user growth rate going forward.
Nevertheless, increasing competition for ad dollars from players like Facebook (FB - Free Report) , Alphabet (GOOGL - Free Report) remains a threat for this Zacks Rank #3 (Hold) stock.
A Key Pick
A better-ranked stock in the technology sector is Micrososft (MSFT - Free Report) , sporting a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term earnings growth rate for Microsoft is pegged at 12.3%.
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