Twitter executives are pinning the company's growth on its "OLV' (online video) strategy.
For some time now, Twitter has been a company in decline.
Once it reached the 300 million monthly active user landmark, its once-meteoric growth stalled. Revenue growth is slowing down too. And with the company still yet to turn to turn a profit, Twitter needs to do something drastic in order to achieve its publicly stated target of reaching GAAP (generally accepted accounting principles) profitability by 2017.
But Twitter has a plan.
Speaking on the company's third quarter earnings call on Thursday, Twitter COO Adam Bain repeatedly mentioned his "OLV" strategy.
"OLV" stands for "OnLine Video". The online video ad market represents a "$9 billion - $10 billion" opportunity, according to Bain.
For its second consecutive quarter, video was Twitter's biggest ad product by revenue and its fastest-growing, Bain said.
For years, people have been tweeting along live as they watching traditional TV. The company famous for 140-character text posts is going all-in on TV-like video.
Twitter says the video bet is showing signs of paying off
Twitter has been building up to this for a while now.
In, 2012 it bought short-form video service Vine (and shut it down on Thursday — although it never had ads). Twitter launched its Amplify video product in 2013, which allows brands to complement their TV advertising or programming with Twitter ads. Twitter acquired live video-streaming app Periscope for $86.6 million last year. Periscope hasn't necessarily become a mainstream app — it only has about 10 million users — but it's taught Twitter a lot about live video, which is where Twitter sees a huge growth opportunity.
From September this year, Twitter began streaming Thursday Night Football games. Twitter said on the earnings call that the three most recent games attracted more than 3 million viewers overall. In TV rating terms (which typically look at how many people watched within a specific timeframe) the average audience per minute would have only been in the low hundreds of thousands (and lower than the 2.36 million people per minute who watched Yahoo's NFL livestream last October.)
Nevertheless, advertisers have been lapping it up. Bain said a dozen "high-tier" brands bought NFL packages in the past quarter.
"It's a very valuable ad product: sound-on video ads, in-between high quality content, and with completion rates now that are industry-leading," Bain said.
What has also been encouraging about the live video ad deals, according to Twitter's chief financial officer Anthony Noto, is that it Twitter has been able to bundle in its other ad products as part of an overall package.
This year, Twitter also livestreamed the presidential debates. Noto said Twitter achieved a record amount of daily active users (although he didn't provide an exact figure) on the days the debates aired.
Noto said 70% of the audience for the debates and NFL was under 35 — the highly lucrative demographic advertisers want to reach, and the kind of viewers that are more likely to cut the cord and watch less traditional TV. Users don't need to be logged in to watch its big live video content, so it's a way the Twitter can monetize an audience that isn't registered, keep them engaged for longer than if they were simply reading a single tweet, and hopefully tempt them to sign up.
What's coming down the line
The next quarter is going to be the big test to see whether Twitter's live video bet can make a material positive impact on revenue. Noto said, having broadcast just two NFL games in Q3, there was only a "small" revenue contribution, but the company is expecting a "more monetized" Q4. (Seasonally, Q4 is also the most lucrative quarter for advertising companies.)
Noto said Twitter is improving the live video product. It is working on making the tweets that appear in the live video feed more personalized, such as bringing in tweets from people you follow (not just tweets created by other people watching the live video feed, or people using a specific hashtag) or making sure it surfaces Patriots fan tweets to Patriots fans and Texans tweets to Texans fans, for example.
The live lineup is also expanding. Twitter will also be airing NBA and NHL games, plus financial content from the likes of Bloomberg and Cheddar.
Noto said such deals are "very positive from an economic standpoint" because it offers to partner with content owners, agree a revenue split, and make the partner's brand prominent. Those type of partnerships reduce the "economic burden," Noto said, because the benefit to content partners isn't just about ad dollars but also helping them reach a young, global audience on mobile.
Bain said recent measurement, targeting, and supply improvements have helped more marketers shift their online video budgets to Twitter. He added these are "new incremental budgets."
In other words, people aren't spending less on other Twitter ads in order to increase the amount they spend on Twitter video ads — it's just more money going in Twitter's direction.
Will it work?
Twitter is nowhere near alone in pursuing a video strategy.
Every major online platform is increasing its video output. Facebook even launched a huge multi-million dollar advertising campaign earlier this month to encourage people to post more live videos. And broadcasters have years and years of experience of streaming content online.
Tom Goodwin, executive vice president and head of innovation at Publicis-owned media agency Zenith, told Business Insider that Twitter's "great strength" is its number of highly engaged, influential, and desirable (from an advertiser's point of view) users."When you have so much valuable attention captured and you've got a clear platform to build off and can leverage personal data to serve video ads more precisely than most then you're in a great place," he said.
Where the issue may lie for Twitter is that the other platforms vying for the $9 billion to $10 billion online video market Bain is looking to take a chunk of — YouTube, Facebook, Snapchat, Hulu, and so on — come from a better starting point.
"They either have brands, user experiences, expertise or rights that are more useful to transition into this space. If Twitter can leverage their essence as a place for conversation, more aggressively explains their presence on other screens via their Apple TV app and onto other devices, platforms and screens, then it could perform well," Goodwin said. "But due to the competition ahead, I don't see this as the future of Twitter but a healthy side business."