Zacks Investment Ideas feature highlights: Twitter and Alphabet

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For Immediate Release

Chicago, IL - February 15, 2017 - Today, Zacks Investment Ideas feature highlights Features: Twitter (NYSE: TWTR - Free Report ) and Alphabet (NASDAQ: GOOGL - Free Report ).

How Twitter Can Fix Itself by Learning from YouTube

When Donald Trump first began gaining some momentum in the presidential race, it looked to be pretty fantastic news for Twitter (NYSE: TWTR - Free Report ), and investors in the social networking giant too. After all, Trump would frequently go onto the site to announce new plans or fight back against his detractors. It was (and continues to be) an incredible resource for political updates.

Now that Trump is President, his tweets move markets. His attacks on companies can send share prices lower in a heartbeat and are an important thing to consider for investors these days. Some have set up apps to track his tweets and how they relate to the market. Others do a tweet analysis in order to get better insight into the mind of the President, including The Atlantic'sTrump Tweet Tracker .

But beyond Trump, Twitter also managed to become the single greatest collection of primary sources of all-time. When breaking news happens, it is almost always reported first hand on Twitter, and then it is disseminated out from there.

You'd think that these factors alone would make Twitter an unstoppable media juggernaut. A must for journalists and those seeking to stay up-to-date on the news alike. So how has Twitter capitalized on this incredible timing and presidential stroke of luck? Well, in short, it hasn't.

Bad Earnings Report Again

The company posted yet another disappointing quarter for Q4, missing expectations on the revenue front and posting shockingly poor active user figures. It remains stuck around the 320 million active monthly user mark, and can't even seem to grow revenues either. Add in disappointing adjusted earnings guidance, and it isn't a great situation by any stretch for TWTR investors these days, especially given that the company has a Zacks Rank #4 (Sell).

And let's remember, these figures are with the leader of the free world literally using the service to clarify policy and goals on a regular basis. The environment cannot possibly get any better for Twitter. Its product is in the news on a near hourly basis at this point and it still can't find a way to get the job done.

Clearly, Twitter needs a shakeup and it needs a bit of a Hail-Mary in order to get back into investors' good graces. So, what can the company do?

Twitter Needs to Copy YouTube. Now.

Fortunately for Twitter, the path to relevancy and growth is already laid out before them. The good folks at Alphabet (NASDAQ: GOOGL - Free Report ) have already done all the hard work in their YouTube division and Twitter needs only to copy their best practices.

First and foremost is capitalizing on the incredible missed opportunity of getting an ad right on to tweets. As you can see in the picture below, there is always a big white box at the bottom right hand corner of each tweet.

Why not fill that with a small advertisement? Sure, some people are not going to like that, but people will adjust accordingly. We saw something similar with YouTube where at first only certain videos had ads, and now nearly everything has an advertisement before the video. People have adapted and it has become the norm to see this before a video. People will do the same with Twitter (and embedded tweets) and this will help with casual users (much the same way embedding helped with casual YouTubers).

After all, these casual users who mostly see tweets embedded somewhere else make up a huge base of people and are arguably the key to Twitter's success. Finding a way to make money off these people-much like how YouTube doesn't need you to be signed in or making videos to make revenue off of you-should be paramount in Twitter's near term plans.

According to Twitter, embedded tweets reach more than a billion people each month across the web, a truly massive figure. And that number is actually from before Donald Trump burst onto the scene and tweets were on the nightly news on a regular basis.

But what if people hate this idea and recoil from the service? Well, an easy way to placate people will be to pay the content generators for the work they are doing. Giving tweeters a slice of the ad revenue that they generate would go a long way to getting people and small businesses to tweet more, and it is pretty much akin to what YouTube does with their stars. And Twitter has even looked to do this on the video side , so why not extend it over to their bread and butter anyway?

Bottom Line

Are some of these ideas going to be popular? Definitely not. But Twitter needs to try something in order to jumpstart its floundering share price and lackluster growth. Everything needs to be on the table, and now is the time to do it.

The company finds itself in a truly historic position and it is an opportunity that isn't going to come around every four years. The confluence of Trump and the increased desire for real-time (and unfiltered) news from around the globe should be a godsend for Twitter, but the company has completely failed to capitalize on the trend.

Taking some of YouTube's best practices might be a good place to start in order to return to relevancy though. It certainly has a better shot of reviving the stock than anything Twitter has come up with recently, and it could push TWTR back towards growth too.

And a position of growth would make Twitter a much better candidate for a takeover, perhaps from a company like Alphabet. Such a partnership makes a lot of sense and it would allow better integration between Google search results and tweets, while the melding of tweets and YouTube comments would be a great match as well.

So, if Twitter wants to get to this end-which seems like the best possible outcome for TWTR investors at this point-take a page out of YouTube's book and start thinking about ways to get more ads out there, and how to benefit creators in the process. Because if Twitter can't take some risks and find a way to make things work when their service is at the forefront of news and popular culture like it is now, they never will.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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