Amid growing rumors of buying a music service provider,
Twitter Inc. (
recently acquired native-ads developer Namo Media for an
undisclosed amount (probably less than $100.0 million). Following
the news, Twitter's share price increased 3.01% (99 cents) to close
at $33.89 on Jun 5, 2014.
Namo Media specializes in developing native-ads, which can be
featured as a promoted tweet on Twitter or suggested post on
. Native ads are high quality content ads that are developed in
collaboration with brands and online publications.
According to IPG Media, native ads are viewed for the same amount
of time as editorial content and are much more likely to be shared
than a banner ad. Native ads are more engaging than sponsored or
banner ads, which make them an effective tool for advertisers to
reach an audience.
Twitter will integrate Namo Media to its MoPub mobile ad-exchange,
acquired in October last year for approximately $350.0 million.
Namo Media's native mobile platform will help consolidate Twitter's
position to attract more advertising dollars amid intensifying
competition from the likes of Facebook,
Twitter's top line is significantly dependent on ad revenues, which
contributed 90.2% of revenues in the first quarter of 2014. Mobile
advertising revenues were more than 80.0% of total advertising
revenue in the quarter, up from 60.0% in the year-ago quarter.
Twitter launched a number of new products for advertisers during
the quarter. The company allowed marketers to create tailored
audiences from email lists and customer relationship databases.
Twitter also enabled advertisers to target TV conversations for
Spanish-language television and connect with users through Promoted
Accounts in search.
Although Twitter's management remains optimistic about future user
growth, slowing user base is a major concern, as it can keep
advertisers away from the service, thereby hurting top-line growth.
In such a scenario, acquisitions such as Namo Media expand
Twitter's product portfolio. This will help it to attract big
advertising agencies in the long run.
Twitter's recent deal with
Omnicom Group (
is also expected to be a major growth driver. The deal boosts
Twitter's status as an advertising platform that will help it to
attract new advertisers.
Nevertheless, user growth concerns, intensifying competition and
higher operating costs are the major headwinds in the near term,
which will remain an overhang on the stock.
Currently, Twitter has a Zacks Rank #3 (Hold).
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