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A Look at Twitter's Trends before Its 1Q17 Earnings Release

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Part 4
A Look at Twitter's Trends before Its 1Q17 Earnings Release PART 4 OF 15

The Risks in Twitter’s Pay-TV and Subscription Access Push

Twitter considering premium service

In search of more growth, Twitter (TWTR) is reportedly considering launching a premium service available by paid subscription. It is also considering a deal with pay-TV companies to allow users to watch live television within the app as they tweet.

If successful, these efforts could draw more users to Twitter, encourage existing users to be more active on the site, and possibly increase the appeal of Twitter advertising in the eyes of marketers.

The Risks in Twitter’s Pay-TV and Subscription Access Push

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Advertising

According to eMarketer, an estimated $77.4 billion is expected to go into digital advertising in the US (SPY) this year, compared to $72.0 billion for television advertising. This trend implies an enormous potential market for Twitter’s advertising services. The chart above shows the projected US ad spending for 2017.

Twitter investors who have watched the stock plunge nearly 80% from its IPO peak a few years ago could be excited by efforts to unlock new revenue sources through premium services. However, risks abound in Twitter’s attempts to monetize its platform through paid subscriptions, especially where there would be a need to tap into third-party apps.

Hacking of accounts tied to third-party app

The recent massive hacking of Twitter accounts offered a glimpse of risks to social media users and operators. Hundreds of Twitter accounts belonging to celebrities and media outlets were compromised in mid-March 2017. These accounts were defiled with pro-Turkey postings making references to Nazism.

Germany (EWG), the UK (EWU), and the Netherlands were among the countries whose institutions or governments were targeted by the hackers. These attacks were ostensibly caused by Europe’s (EFA) criticism of the Turkey referendum.

It was revealed that the Twitter hack was limited to accounts using a third-party app called Twitter Counter.

Consequences of hacking

Hacking incidents not only expose the affected company to regulatory penalties, but they also dent user confidence in a service, raising the risk of subscriber and revenue loss. As Twitter pushes toward subscription services, the consequences of a hack would be elevated—a risk that investors should keep in mind.

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