Looks like TellApart was a very expensive mistake.
On Wednesday, Twitter CFO and COO Anthony Noto called the desktop retargeting platform “a headwind” in which it no longer plans to invest.
“We continue to face increasingly negative impacts from products we have discontinued or lowered investment in,” Noto told investors during Twitter’s first-quarter earnings call. “One example is TellApart. We expect that to go to zero. That’s a sizable business and the negative impact increases each quarter throughout the year.”
Twitter bought TellApart in 2015 for $479 million (roughly $54 million less than originally reported) in a bid to accelerate its direct-response business.
But despite what sounds like an imminent TellApart write-down – and year-over-year declines in traditional Promoted Tweet and other direct-response ad formats – Twitter isn’t pulling away from performance advertising altogether. It’s still investing, for example, in products to drive website, app installs and mobile re-engagement.
“There are some [DR products] that we don’t think are competitive and therefore don’t have longevity to them,” Noto said. “We’d rather reallocate those resources and double down on things that are uniquely Twitter and leverage our competitive advantages.”
Twitter is hoping to woo advertisers with that unique value proposition during its first-ever participation in the NewFronts on May 1. The pitch to advertisers: Twitter drives brand perception among a youthful audience in discovery mode.
That “allows a brand to be part of what’s happening,” said Noto, acknowledging at the same time that the NewFronts likely won’t translate into actual revenue or profit for Twitter.
TellApart is partially to blame. The headwind from that acquisition will continue to make itself felt throughout the second, third and fourth quarters.
Twitter will also be competing for the equivalent of the scatter market at the NewFronts where the minority of ad dollars get allocated.
Regardless, Twitter is particularly bullish on video and live-streaming. In-stream video advertising, including pre-roll and mid-roll, is Twitter’s best-performing and largest revenue-generating advertising vehicle.
Although competition is growing fierce for live premium content – Amazon outbid Twitter to stream NFL games later this year, and Facebook and YouTube have both shown interest in streaming live football – Twitter is doing what it can to sign deals across its main content verticals: news and politics, sports and esports, and entertainment.
Twitter inked a bunch of new deals with content providers in Q1, including with Sky Sports, Time Inc., Billboard and Condé Nast, and streamed around 800 hours of live content during the first quarter, a 31% increase over Q4, reaching around 45 million users.
Twitter is also exploring other monetization options.
For example, Twitter is looking at what it can do to better monetize inventory through third-party relationships. It’s in the midst of a small-scale test to allow advertisers to buy inventory on Twitter owned-and-operated properties using MoPub, its mobile SSP.
“We’re leaving no stone unturned as it relates to possible areas for growth,” Noto said.
And Twitter needs growth. Last quarter, Twitter’s revenue fell for the first time since it went public in 2013. Although Twitter beat the street’s Q1 revenue expectations of $548 million overall, that still represents an 8% year-over-year decline.
Ad revenue also declined on a year-over-year basis, down 11% to $474 million.
But user growth was a relative bright spot. Twitter reported its fourth consecutive quarter of daily active usage in Q1, a 14% increase year over year, but didn’t provide a baseline number. Monthly active users also increased in Q1, up 9 million from last quarter to 328 million.
