Does Twitter Have What It Takes To Be An Ad Tech Contender?

stateoftwitterTwitter seems to be having a little trouble on the turnaround front – but that doesn’t mean it’s for the birds.

“When I talk to agency and buy-side contacts, they recognize the value of Twitter and that the real-time nature of the platform is unique,” said Dan Salmon, managing director of BMO Capital Markets. “But the advertising community is also aware of the turbulence at the top of the company. They’re not immune to reading the news.”

At the end of January, Twitter saw five major executive exits – including product SVP Kevin Weil, who departed to lead product at Instagram – and a stock price that didn’t know which way was up.

Add stagnant monthly user growth to the mix and the 140-character question becomes: Does Twitter have what it takes to grow users and revenue while also keeping everyone happy, including marketers, investors and power users?

“Twitter knows what it needs to do, but they haven’t articulated that well yet,” said Forrester analyst Erna Alfred Liousas. “In a sense, Twitter needs three different marketing plans.”

One for the marketer and agency crowd, one for existing users and a third to attract that sweet, sweet user growth that investors are jonesing for.

Twitter’s newly appointed CMO, Leslie Berland, who recently joined Twitter’s somewhat denuded executive suite from American Express, should be able to help with the first item on that list – but she’s got her work cut out for her.

Take live-streaming app Periscope, for example, which Twitter acquired for $86 million in early 2015. The good news for Twitter is that engagement seems to be heading north. At AdExchanger’s Industry Preview conference in January, Ameet Ranadive, Twitter’s VP of revenue products, said video views across Periscope, Vine and Twitter’s own platform have increased by roughly 150 times.

Gila Wilensky, director of search and biddable at GroupM-owned Essence, sees a lot of potential around Periscope, but said Twitter isn’t doing enough to get marketers on board.

“Considering it’s been less than a year since the acquisition, usage is impressive, but Twitter needs to do a lot more to generate awareness among brands on how they can use it – it’s a shame they don’t,” Wilensky said. “Maybe they’re not doing that because the revenue isn’t there yet from an advertising perspective, but if they want to see ad revenue, that’s what they’ve got to do rather than just waiting for the brands to come.”

Birds Of A Feather (Sometimes) Stay Together

The Twitter exodus isn’t necessarily representative of a rudderless ship, Salmon said. When a new CEO takes over, as Jack Dorsey did in October, the org chart inevitably changes. The magnitude of Twitter’s recent exec shuffle, though, is a little unsettling, he said.

In addition to Weil, Twitter lost engineering VP Alex Roetter, global media chief Katie Stanton, Vine GM Jason Toff and, sort of ironically, HR head Brian Schipper.

That said, there’s been far more stability on advertising side of the house. MoPub VP Janae McDonough has stayed on board since Twitter acquired the mobile exchange in 2013. Revenue VP Ranadive has been in his role for four years, and Richard Alfonsi has been plugging away as VP of global online sales for nearly as long. And following the TellApart acquisition in April, that company’s CEO, Josh McFarland, joined Twitter as senior director of product.

But Adam Bain is the most calming and steady force. Bain was promoted in September from president of global revenue and partnerships, a post he held for more than five and a half years, to chief operating officer. “He’s been a consistent presence for the advertising community,” Salmon said.

“Twitter hasn’t seen mass exits in their ad tech or in their broader sales capability,” Salmon said. “Or at least not compared to Yahoo’s ad tech business, where they acquire things and then the leaders seem to leave quite regularly.”

Perhaps not the most flattering juxtaposition from Twitter’s perspective, considering Yahoo’s recent and ongoing woes, is the fact that it’s a little early to dance on Twitter’s grave.

Last quarter, Twitter saw advertising revenue grow 60%, but to read the press about it, it’s like Twitter is already dead and buried,” Salmon said. “They’ve beaten analyst expectations more quarters than they’ve missed, but their stock price has declined because investors are not convinced that Twitter has graduated from being a niche platform to a mainstream one.”

MomentsHatching A Plan?

Which ties right into one of Twitter’s core issues: attracting new users without alienating existing ones.

It’s a delicate balance that Twitter seems to be struggling with, said Forrester’s Liousas.

Moments, Twitter’s recently released storytelling tool that curates tweets, photos and videos into more easily digestible chunks, is a good example of the company’s efforts to right the MAU ship. The feature also happened to have been Weil’s pet project before he left.

“Theoretically, Moments is a good way to introduce the platform to a new audience because it centralizes topics and content based on themes,” Liousas said. “But for people already using the platform, it doesn’t drive a lot of value. The topics that come up aren’t always the topics I want to talk about and it doesn’t fit in with the real-time nature of the Twitter platform.”

But Twitter is also working on monetizing what it calls its “total audience,” aka the additional 500 million people who engage with tweets but aren’t logged into Twitter. Twitter has roughly 320 million monthly actives.

Tapping into that off-platform reach would seem to be one of the main motivations behind the TellApart acquisition, which will help Twitter in retargeting and direct response.

Integration of the TellApart technology into Twitter’s ad stack, however, is still “in the early phases,” Ranadive said at Industry Preview.

But the plan isn’t to run an independent third-party ad stack like AOL, Facebook or Google. In fact, Ranadive compared the status of Twitter’s stack to the early days of Google, even before the DoubleClick acquisition that catapulted Google into ad tech.

“We don’t believe that the world needs yet another ad server [and] we’re not actually contemplating at this point standing up an independent third-party ad tech stack,” Ranadive said during AdExchanger’s Industry Preview. “We do have an ad tech stack, but right now we’re using it internally. … Our main focus is on building out our owned-and-operated business and extending those campaigns to the Twitter Audience Platform and into MoPub and other supply sources.”

Stacking Up?

Regardless of scope, Twitter needs to ensure that its ad offerings appeal to advertisers and their agencies alike. It’s not always smooth sailing.

For Adam Cahill, founder of programmatic agency Anagram and former chief digital officer at IPG’s Hill Holliday, there’s not always enough time in the day to include Twitter in the mix.

Cahill and team use MediaMath as their core buying platform. For workflow and efficiency's sake, they look to avoid bringing other platforms on board when possible unless there are any "extremely compelling" features that can only be accessed directly.

“It’s difficult logistically and in terms of scattered reporting, and we don’t want to have to buy direct in another closed ecosystem unless the benefits really justify it,” Cahill said. “One thought for Twitter is for them to make an effort to be more open to DSPs directly so that we don’t have to adjust our workflow to access their inventory.”

For her part, Essence’s Wilensky is a fan of Twitter’s targeting functionality and the ability to home in on real-time conversations. She’s also attracted to Twitter’s organic reach versus other social platforms (ahem, Facebook), where the algorithms aren’t generally shy about making their preference for paid posts known.

But Wilensky is less than enamored of Niche, the social media talent agency Twitter acquired in February. “There’ve been lots of other companies over the past 10 years that could tap into social influencers and get them to promote a product for cost,” she said. “Doesn’t seem like a very innovative place to invest to me.”

She’s also a little baffled by the redundancy in some of Twitter’s ad formats.

“There’s a lot of duplication right now,” she said, pointing to conversational tweets, an ad unit released at the beginning of January that allows users to personalize and share brand messages. “You can already retweet a Promoted Tweet, so all this really does is let people retweet a brand’s post, but make it look like it’s coming from their own handle. Basically, it’s just copying a post and sharing it, which is kind of silly.”

But the deeper question is around whether Twitter has what it takes to make use of its ad tech acquisitions. Forrester analyst Richard Joyce doesn’t see why not.

“Sometimes startups buy ad tech and they don’t know how to use it; even really big companies like Yahoo sometimes don’t,” Joyce said. “Time will tell. But that being said, if Twitter is trying to make better advertising experiences and options for advertisers and users, they've essentially acquired a delivery system and predictive technology so that they can attempt to deliver these ads effectively.”

BMO’s Salmon is also bullish. As of Monday morning, Twitter was trading at $16.80. (Contrast that with Facebook’s Monday morning stock price of $112.21.) But Salmon has a price target on Twitter of $32, banking that Twitter will double its value over the next year.

“Twitter knows what they’re doing with their ad tech. They also clearly recognize that they’re not going to try to go toe to toe with DoubleClick as a full-stack option,” Salmon said. “Twitter wants to focus on helping buyers access their platform, and they want to focus on using TellApart to help direct-response advertisers integrate their customers’ data to target across Twitter and the MoPub platform.”

Easier said than done, of course, even after the acquisitions have been fully integrated.

“It’s a very competitive environment,” Forrester’s Liousas said. “Whatever Twitter comes up with also has to stand against the likes of Facebook and Instagram in terms of monetization and usability, and that’s very hard to do.”

That said, Dorsey’s only been in the CEO seat for about four months. Everyone wants and expects speed, but nothing changes that quickly, Liousas said.

“Given the mountain that Dorsey and team have to overcome, it’s going to take at least a year to get everything into place, for everyone to get on the same page and for the ideas to continue to flow,” she said. “I think they need a little more time.”

Twitter declined to be interviewed for this story.

 

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