Whereas Twitter’s recent deal to broadcast National Football League contests next season doesn’t represent a game changer for the beleaguered social media company, it could help it boost its stagnant user count.
“This is a very good first step to expand its user base,” says Paul Sweeney, North American director of research for Bloomberg Intelligence. Twitter had 305 million monthly active users in the fourth quarter, unchanged from the prior three months. That compared with 1.6 billion for Facebook in the fourth quarter.
Early this month Twitter won the bidding to show ten Thursday-night games that will also be aired on a broadcast network (NBC or CBS) and on cable’s NFL Network. Twitter reportedly will pay $10 million and beat out Facebook, Amazon, Yahoo and Verizon Communications, despite bidding below them. Twitter will show the networks’ national ads but can sell its own advertising for the 15 local time slots.
“This is part of a longer-term goal for Twitter of bringing in more high-quality performance content to attract lightly tethered users and nonusers, creating deeper engagement,” says Peter Stabler, an equity analyst for Wells Fargo.
That ad revenue obviously won’t move the needle for a company with revenue of $2.2 billion last year. Yesterday Twitter reported first-quarter revenue that missed the mark following lower-than-expected advertising spend. The stock has been volatile since yesterday afternoon and has plunged 15 percent today in light of lowered analyst expectations.
The NFL occupies a leading spot in the popular culture, with important games routinely topping the lists of the most highly rated television broadcasts. That gives Twitter a large audience to attract to its platform. “You can argue that there is no programming better than the NFL to entice a broader audience,” Sweeney says. Yahoo streamed an NFL game last season that drew more than 15.2 million users.
And that might be enough to make the venture profitable for Twitter. Citigroup analysts crunched some numbers indicating that’s a real possibility. Thursday-night football broadcasts averaged 19.5 million viewers in 2015. The analysts assume 53 percent of that audience (10.3 million) aren’t Twitter users, based on a survey by GlobalWebIndex showing that 47 percent of North American NFL fans are Twitter users.
If 10 percent of the 10.3 million viewers (1 million) become Twitter users, the acquisition cost is $10 per user. “Given that Twitter’s U.S. ad revenue per monthly average user was more than $19 in 2015 and should grow further this year, this NFL deal may prove to be a profitable source of user acquisition in 2016,” Citi analysts write.
The fact that Twitter was able to gain live sports programing was a coup, analysts say. Sports are important for the service, with tweets proliferating during major athletic events. “It’s a power alley for them, because nearly all sports are consumed live,” Stabler says. “Live sports is a key piece of the ecosystem.” And Twitter has a heavy emphasis on what’s happening now.
Getting people to coalesce around an event creates plenty of potential for Twitter to monetize its content, says Jennifer Polk, research director at technology analysis and advisory firm Gartner. The NFL deal could be a stepping stone for Twitter to broadcast other big-time sporting events such as National Basketball Association games and the National Collegiate Athletic Association basketball tournament, she says.
Of course, when broadcasting an event like an NFL game, the company has to avoid just serving as a fire hose for massive amounts of content. “Twitter needs to give you a way to filter out what you don’t care about, so you just get things like tweets from journalists covering it, or participants or owners,” Polk says. Some Twitter users have been turned off by receiving reams of tweets that don’t interest them.
Twitter has many opportunities to acquire live content other than sports as well. Entertainment and news, which already account for many of the service’s tweets, are examples. “I wouldn’t be surprised if they try to get digital rights for the Grammys or something like that,” Stabler says. “The NFL deal is a piece of a larger strategy.”
To be sure, not everyone is enthusiastic about Twitter’s venture. “We think it’s very unlikely this deal can be profitable,” Evan Wilson, an analyst at Pacific Crest Securities in Portland, Oregon, writes in a report. Twitter is joining the many companies ratcheting up their sales and marketing costs in an effort to chase new users, he says.
