Instant Analysis: Will Twitter's Promoted Stickers Move The Needle?

Twitter (NYSE: TWTR) recently introduced Promoted Stickers, which arecompany-branded stickers users can post on their photos. It might seem like a long shot to expect users to turn their own photos into corporate ads, but Pepsico (NYSE: PEP) is already offering almost 50 stickers for the platform. Will this effort help Twitter squeeze more revenue from its users as its user growth stagnates, or is it destined to flop?

Image source: Twitter, Author's screenshot.

Why Twitter thinks this will work

Sticker-based promotions have worked for companies like Line (NYSE: LN) and Snapchat. Companies in Asia often offer free Line stickers, which replace commonly typed phrases like "thanks" or "good night." The branding on those stickers, which often feature company mascots instead of logos, usually isn't intrusive. Companies either give away these stickers for free, or if certain conditions -- like "friending" the company or scanning a purchased product's barcode -- are met. Snapchat also lets usersplaster branded filters (stickers, frames, and drawings) on their photos. However, some of those filters can only be accessed when users visit a participating business like McDonald's.

Line's approach is logical, since the stickers save users time by replacing common phrases with cute pictures. Snapchat's approach also makes sense because the filters can act as a more colorful "check-in" to locations, and the photos are only shared between friends.

Twitter's strategy simply isn't built with users in mind. Instead, it expects them to take a photo, post a branded sticker on top of it, and tweet it out to all their followers on a platform which was built for self-promotion. That approach doesn't simplify anything, and users who want to place stickers on their photos will probably simply choose the unbranded smiley sticker instead of the Pepsi-branded one.

The key takeaway

Twitter's monthly active users inched up 3% annually to313 million last quarter, and revenue rose just 20% to $602 million. Both figures represented its lowest growth rates since its IPO, and its bottom line remains deep in the red.

Twitter is trying to generate more revenue from its stalled-out user base with curated tweets in Moments, integrated videos from Vine and Periscope, new streaming features, and now branded stickers. Unfortunately, asking its users to post ads just doesn't make sense, and I doubt that it will boost Twitter's revenue in a meaningful way.

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Leo Sun has no position in any stocks mentioned. The Motley Fool owns shares of and recommends PepsiCo and Twitter. 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.