Twitter Unveils Promoted Video Ad Service

Aug.13.14 | About: Twitter, Inc. (TWTR)

By Michael Ide

Embedded video will give advertisers another way to engage with users, and Twitter another way to generate revenue

Twitter (NYSE:TWTR) rolled out its new video advertising service today following 'months of experiments and feedback' in its latest attempt to generate better revenues from the popular microblogging platform.

"Video is an incredible storytelling medium and we're thrilled to be giving brands, publishers and a subset of verified users the ability to share organic and Promoted Video on Twitter," writes Twitter's senior product manager of TV and Video David Regan.

Twitter will charge advertisers every time a video is started

Part of the Twitter Amplify program, Promoted Video will let publishers and advertisers embed videos into their tweets so that people can view them simply by tapping on the image. The program will use a cost per view (CPV) ad buying model that charges for every time someone starts a video, though Twitter will also supply completion rates, reach, engagement and other analytics so that advertisers can gauge how effective the videos are. Unlike Facebook's embedded videos which have started playing in people's timeline (and which start playing on their own, muted), Twitter videos will black out the rest of the smartphone screen while they are playing.

Twitter says that it wants to expand embedded video to content producers and some other users so that video becomes a normal part of everyone's Twitter experience, but it's going to do so slowly, which seems wise. The prospect of hijacked hashtags complete with offensive videos could go downhill quickly.

Twitter still riding high from 2Q earnings beat

After a challenging year, Twitter's stock price got a boost at the end of July after the company announced better than expected monthly average user (MAU) numbers and non-GAAP earnings of $0.02 per share compared to the consensus $0.01 EPS loss. Second quarter GAAP losses jumped from $42 million in 2Q13 to $145 million in 2Q14 because of $158 million in stock-based compensation, which doesn't seem to have phased most investors.

Even though its business model isn't fundamentally different from Facebook (connect people, sell access to them to advertisers), Twitter has had a much harder time turning that into solid earnings as most online advertisers prefer to go with Google (NASDAQ:GOOG) (NASDAQ:GOOGL) or Facebook (NASDAQ:FB). Getting non-GAAP earnings into the black ahead of schedule is promising, and new services like Promoted Video have the potential to get it over the hump into real profitability.

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