Why Video Strategy Won’t Drive Twitter’s Costs through the Roof

Expenses fell 16%

Twitter’s (TWTR) total costs and expenses (or opex) fell 16% YoY (year-over-year) to $582.4 million in 3Q17 despite the company’s announcing roughly 30 live video partnerships during the quarter.

Although Twitter is expected to continue spending more on the product side of things as it seeks to drive more audience growth and platform engagement, its ongoing video strategy, which is part of building a more active audience, isn’t expected to drive costs through the roof.

Why Video Strategy Won’t Drive Twitter’s Costs through the Roof

Video strategy based on revenue sharing

As much as Twitter is betting on videos to drive audience growth, platform engagement, and revenue and profitability improvements, it turns out that the company has designed its video strategy in a way that is less draining on its resources.

Speaking at a recent global technology conference organized by Wall Street company UBS, Twitter’s chief financial officer, Ned Segal, explained that the company’s video deals exist purely on a revenue-sharing basis, implying that the company isn’t spending a fortune on video content acquisitions.

Amazon (AMZN) is estimated to have spent $4.5 billion on video acquisitions in 2017, while Netflix (NFLX) spent more than $6.0 billion on video acquisitions in 2017, and its content budget for this year is expected to swell to more than $7.0 billion. Apple (AAPL), Facebook (FB), and Alphabet’s (GOOGL) Google have also reportedly lined up massive war chests for video content.

Partners plug in to Twitter to reach wider audience

Twitter is winning content partners by helping them extend their audiences, so the company is taking a cut of the advertising revenue that its partners would not have generated without plugging in to its platform. In this way, it’s getting more content and advertising partners interested in its video strategy.