Can Twitter's New Strategy Solve Its Problems?

Twitter's earnings dropped and the company is considering a new strategy


Twitter recently posted its mixed quarterly results and sales guidance, which turned out to be disappointing, and left investors worried. In Q2 of 2016, the social media company lost 13 cents per share on sales of $602 million, while Wall Street called for 10 cents per share from $607 million in revenue. Additionally, the company expects revenue of $590-610 million for the third quarter, which is below analysts' predictions as they expected for $678 million, according to Thomson Reuters consensus estimate.

In their official statement, Twitter said the fall in Q2 and expected turbulence in Q3 2016 are due to the overall decline in advertising demand and noted that there are challenges that the company needs to tackle to improve their performance. Despite the decline in earnings, the brand is still going strong, with average monthly active users having reached 313 million, compared to the 312.1 million predicted by analysts. In order to tackle the problem with advertisers, Twitter is planning to deliver a new strategy, focused on adding new features and functionality to the platform, specifically through video content.

For the last couple of months, Twitter has been actively acquiring digital streaming rights, which resulted in deals with the NBA, NFL, Bloomberg, CBS and MLB Advanced Media, indicating that Twitter has plans for sports. The objective is to live-stream games and related content, embedded to Twitter's forum for live discussions. Plans also include the production of made-for-Twitter shows, centred around game highlights.

Compensation for advertising demand is expected to come from adverts shown during the NBA and MLB broadcasts, with more advertising opportunities to be discussed. However, one of the main challenges is attracting people to watch the games. The current problem is that Twitter won't have access to nationally broadcast games and playoffs, meaning that a big part of the content will be missing. The platform aims to show 'out of market' games, meaning those in the local TV market for one of the teams, won't have access. The issue is serious, considering that the majority of people support their local team. Even though Twitter's strategy execution relies on trending video content, so far, the deals secured don't offer the 'must see' content, but rather serves a narrow niche.

Live-stream videos are successfully exploited by giants like Facebook and Snapchat, covering all kinds of events and activities. Also, Facebook has already aligned its algorithms in favor of live-streamed content. Thus, Twitter needs to come up with a solution that will be capable of competition and reaching a bigger audience.

Rising inconsistency in earnings raised concerns over Twitter's capability to remain independent, considering its CEO Jack Dorsey is also involved in Square and possibly giving Twitter less attention. The former Yahoo CEO Ross Levinsohn believes that Twitter is likely to collaborate with another brand in the course of the next 2 years, suggesting that it would deliver better performance in sales and more innovation as a result. It's hard to say whether the new video strategy will work before the new quarterly report is published, but nonetheless, there are exciting times ahead for sports fans on Twitter.

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