Twitter’s struggle to attract new users has weighed on the company’s advertising business.
In October, Twitter issued a fourth-quarter sales outlook that was below what many analysts expected and reported yet another quarter of slowing user growth. And this spring, forecasting firm eMarketer lowered its estimate for Twitter’s ad revenue growth for the year to 61.8% or $2.08 billion. Despite its challenges, Twitter’s ad business is still sizeable. The company’s ad revenue is predicted to make up about 8% of social network ad spending this year globally, eMarketer said, while Facebook FB +0.00% is expected to take in 65%. Twitter can thank a startup it acquired early this year, Niche, which connects Internet stars and creators with big brands, for a growing amount of its sales.
Brands look to Niche as a tool for reaching millennial and Generation Z users, people born after millennials, with ads that are meant to be entertaining and highly creative. Since Twitter acquired Niche in February, reportedly for about $30 million, Niche’s headcount has doubled to more than 50 and Niche opened its first international offices in Brazil and the U.K. The total number of Niche campaigns running at any given time has grown by five times, and the average cost of Niche campaigns has risen by more than 250% since the acquisition, Twitter said.
“Niche has become a significant revenue driver for Twitter,” cofounder Darren Lachtman said. “It’s a rising source of revenue. We are seeing an amazing amount of traction around the holidays.”
Niche helps brands create original, custom ads through its network of more than 22,000 creators, up from 6,000 creators in February, and hundreds of brands and agencies. Brands buy campaigns through Twitter, which pays the Niche creators. The ads can be made as animated GIFs, short or longform videos or as photos. Brands often come to Niche with a brand symbol or emotion they want to convey in their ad, and Niche and the content creators help storyboard. Starbucks SBUX -1.69%, for example, came to Niche wanting to create an ad that highlighted its signature red cups. The result was a short video that only briefly displays the company’s actual logo. Brands and content creators can then distribute the ads through their accounts on social networks like Facebook, Instagram, Twitter and its video apps Vine and Periscope, Snapchat and Google GOOGL -0.26%-owned YouTube. Brands sometimes use multiple creators who might excel on some networks more than on others, and Niche provides data to creators and brands about how the ads perform.
The cofounders said Niche was an appealing acquisition target because brands repeatedly told Twitter they didn’t have great content to promote. They also said Niche can save brands time when they are trying to package ads that that are tailored to many different platforms, such as vertical videos on Snapchat or Twitter Moments.
“Just the fact that we are a major social media platform that’s offering content creation is really unique,” Niche’s second cofounder Rob Fishman said.
Fishman formerly ran social media at AOL and the Huffington post. He also cofounded Kingfish Labs, a Facebook-data startup, which was acquired by BuzzFeed in 2012. Lachtman was previously a senior director of business development for Bedrocket Media Ventures. The duo met in 2013 and started Niche in New York that August.
In a Twitter survey including more than 350 pieces of Niche content, the company found an engagement rate of 13% for all promoted Niche campaigns. Niche tweets, which can be promoted by the brand or by the creator, have a cost per engagement of 11 cents, 60% cheaper than other promoted tweets in which a brand has partnered with a creator. Twitter also found that Niche ads boost brand awareness by about 56%.
Twitter has been opened up its newest ad inventory to Niche. All 10 ads that have been part of the site’s new hand-curated “Moments” tab have included Niche creators. Twitter’s investment in Niche is part of a larger push by the social network to expand video and video-creation tools on its site. Twitter acquired live-streaming video app Periscope for about $100 million this spring, and this year enabled users to shoot, edit and post videos through its flagship app.
Fishman said anyone with a big online audience and a creative bent can be a creator on Niche. While most creators find Niche, the team does have a community manager who scouts for social media stars with large followings.
“I love that things are integrated,” said a creator on Niche, David Schwen, who focuses on stop-motion videos. “Something you make on Vine ends up tweeted, or ends up in a Moment. Someone will contact me and say, ‘We have this great opportunity. We think you’d be a great ft.’”
Shannon Jenest, director of communications at Philips Sonicare, said her company turned to Niche to promote its electronic toothbrush because it wanted help making ads that would prompt viewers to talk about the product with friends. She said Philipscame to Niche with flexibility about how their campaign could be designed, but with a specific request to convey the loyalty Sonicare owners have to the product. Philips worked with about 10 different creators, such as a comedian with nearly 20 million followers across his social channels and an “illustrator mom,” to make several ads.
“What we’re doing is really tapping into an authentic voice,” Jenest said. “We give them a creative springboard, in this case it was the indescribable feeling of ‘we love this thing so much.’”
While Philips’ spending on TV advertising is still substantial, Jenest said Philips is shifting more and more of its advertising budget to social platforms, particularly Facebook and Twitter.
Jenest said Philips worked with content creators and Web stars on multi-platform ad campaigns before it turned to Niche, but that using Niche made the process more efficient and organized.
“It gives us access to a database of creators who are on board and get it and know how to create the content,” Jenest said.
Although Twitter’s monthly active users are about a fifth of Facebook’s 1.55 billion, Niche is a service that will likely be increasingly valuable to Twitter as more companies turn to Internet stars and social apps to reach millennials.
via Kathleen Chaykowski at Forbes