Twitter Says It's Seeing Less Demand From Advertisers

Social Media Rivals Putting Pressure on the Business

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Twitter's Market Street headquarters in San Francisco. The company said Tuesday that growing competition for social media ad budgets was having an effect.
Twitter's Market Street headquarters in San Francisco. The company said Tuesday that growing competition for social media ad budgets was having an effect. Credit: Twitter

Twitter is still feeling the loss of advertisers' love. The social messaging service today said it expects to see lower demand from marketers over the next three months, a trend it started seeing at the start of the year.

"Our brand business remains strong in absolute terms, but there are some new challenges that we're now tackling head-on. First, there is increased competition for social marketing budgets, which requires us to continuously raise the quality bar on the advertising solutions we bring to market," Twitter said today in a statement to shareholders, delivered while releasing second-quarter earnings. "Second, while we have worked to drive higher ROI for advertisers (by leveraging our current user base, ad formats and innovations in targeting, creative and measurement), we're still priced at a premium [rate] relative to others. This has proven to be a headwind in growing Twitter's share of overall social budgets and in our ability to grow faster in both video and performance advertising."

The social budgets indeed are shifting as more money flows to upstart rivals like Snapchat, which is competing for the same type of marketer as Twitter -- ones that are interested in live events, video and youth.

"Facebook is No. 1 but Snapchat is now second in the minds of marketers who are attracted because it's exciting and new," said one top agency media buyer, speaking on condition of anonymity.

A number of media buyers expressed similar sentiments, seeing clients move money out of Twitter into Snapchat.

Still, Twitter is banking on its still nascent turnaround plan under returning founder Jack Dorsey, who is overseeing big changes to the platform. The letter to shareholders outlined a five-point plan to reinvigorate Twitter: "We have five priorities for the year: refining our core service, live-streaming video, creators and influencers, safety, and developers," the letter said.

Twitter said monthly users were up 3% year over year to 313 million, which is still behind many rivals, especially Facebook and its 1.6 billion users. Instagram has more than 400 million.

Twitter's ad revenue hit $535 million last quarter, an increase of 18%.

Twitter has been updating its offering, with a new timeline that serves tweets according to an algorithm that is designed to make the content more relevant to users. It also has developed its video offerings to encourage more premium publishers and studios to share on the site.

A new deal with the National Football League will have Twitter streaming games in the upcoming season, and it struck similar deals with Major League Baseball and National Hockey League. Advertisers are paying high rates to be associated with football in the fall, up to $8 million for some packages, according to Twitter.

One media buyer said that Twitter has been getting better with its ad technology as well, especially since it has integrated with Google's DoubleClick, through which advertisers can now buy Twitter ads.

"An example of our efforts is our partnership with Google and the integration with their DoubleClick Campaign Manager (DCM) to help advertisers better understand the impact of Twitter ads across both desktop and mobile. We plan to show advertisers desktop conversions in Q3, with the inclusion of mobile conversions in the future," Twitter said in its earnings statement.

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