Twitter Video Is Exploding -- Will It Translate to Success?

By Markets Fool.com

Source: Twitter.com

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If there's any question about where Twitter's ad platform is heading in the coming months, it can be answered by a single number in an advertising playbook the company recently made available to marketers.

Twitter says its video views were up some 220 times over the views of a year ago.

That's a big number, but it may tell us less about where Twitter stands right now than it tells us about where Twitter has come from and what direction it's heading in.

Unlike Facebook , which said last year it had hit more than 8 million video views every day, Twitter is not yet revealing viewing numbers that reveal the precise progress it's made and where it stacks up to Facebook and other big players in online video, such asAlphabet's YouTube, Snapchat, and Verizon's AOL.

Still, the signs are there that Twitter is making a big push on this front. A letter to shareholders this quarter identified video as a "key tool" for the company moving forward.

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Twitter has been building out that platform on a number of fronts. Along with purchasing the live video platform Periscope it already owned six-second-video platform Vine -- it has been making it easier to upload smartphone video to its app as well as allowing auto-play videos in your feed.

From mobile to video

Video is mostly a mobile phenomenon for Twitter. Some 90% of the videos viewed on its platform are viewed via smartphone, the company says.

Mobile ads deliver the company 88% of its ad revenue, even more than rival Facebook, which generated 82% of its ad revenue from mobile.

But Facebook's mobile ad game is growing fast, up from $2.4 billion in the first quarter of 2015 to $4.3 billion a year later -- and making up an increasingly larger share of the company's overall advertising revenue.

The mobile video advertising market overall is growing fast, roughly doubling between 2014 and 2015. It's expected to grow by an additional 147% over the next four years, according to industry research firm eMarketer.

Some of that spending will replace traditional ads on Twitter and other sites, but because video ads often perform better than display ads, it should translate into bigger revenue for the company.

Chasing the competition

It's too early to judge Twitter's progress on the video ad front. Its Chief Operating Officer Adam Bain said the company is at the stage where it sees advertisers "testing into these higher performing units" like video ads.

"They haven't grown the spend yet," Bain told analysts last month.

But he said the company believes that they will grow that spending as it continues to build out the platform, providing ways for marketers to better target audiences and offering additional ad-buying options.

Analysts have not yet been impressed with the company's performance or what it's offering for the future. Earlier this spring, eMarketer lowered its forecast for Twitter by about 10%.

No doubt, Twitter is behind its chief rival on the video ad front. Facebook's push into mobile video has been fast and unrelenting. And it's hard at work rolling out new products and improvements to advertisers interested in video spots. The social network highlighted a number of early success stories in its latest conference call, and has since announced plans to start letting advertisers employ video ads through its audience network so it can reach potential customers with their videos even when those people are not on the Facebook platform.

A challenge and an opportunity

Twitter's advertiser playbook billed the rise of video as "both a challenge and an opportunity for marketers." It's also both a challenge and an opportunity for Twitter, especially since it has a rival in Facebook that is building out an impressive video ad platform to reach mobile users.

Twitter has its work cut out. The newfound focus on video advertising does indeed present the company with a significant opportunity, and the reported explosion in video views on the platform over the past year is good news for the company.

But to capitalize on that front will require Twitter to execute well in a competitive market. The good news is that it's a young market, poised for continual growth over the next several years. The bad news is that Twitter already appears to be playing catch-up with its chief rival.

The article Twitter Video Is Exploding -- Will It Translate to Success? originally appeared on Fool.com.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John-Erik Koslosky owns shares of Alphabet (A shares), Facebook, and Twitter. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Facebook, Twitter, and Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.