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Twitter’s Ad Revenue Could Stall with Stagnant User Base

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Jun. 23 2016, Updated 9:05 a.m. ET

Is Twitter losing ground in the ad space?

Previously in this series, we saw how Twitter’s (TWTR) user base remained stagnant despite its efforts to introduce new features. The company made a lot of product improvements last year, but its user growth showed no signs of improvement and the company’s user engagement declined.

It is vital for Twitter to drive user growth and engagement in order to attract brand marketers.

During the last reported quarter, Twitter’s revenues from advertisements grew by 37% year-over-year. However, the company noted that the brand spending on its platform didn’t grow as quickly as it expected.

This is not a good sign as ad spending on its platform is the backbone of advertising revenues. Further, the company witnessed softness in its older legacy brand products.

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Are advertisers shying away from Twitter?

A survey by RBC Capital revealed that the number of advertisers who plan to spend less on Twitter is growing. According to this survey, 23% of advertisers now plan to reduce their spending on Twitter, while 32% plan to increase their spending. This is a cause for concern, as the company earns most of its revenues from advertising and lower ad spending on its platform would only amplify its problems.

Twitter has made serious efforts to drive ad revenues. The company earlier introduced new premium ad products such as Promoted Moments and First View. The aim is to attract more views by placing the video ads at the top of users’ timelines for maximum exposure. Further, it is working on video tools to improve its ad targeting capabilities.

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