Twitter's stream of Thursday Night Football games successfully launched on Sept. 15, and it's helped the Twitter stock price climb 1.2% in the last week.
CEO Jack Dorsey signed an exclusive 10-game deal to stream Thursday Night Football on Twitter April 5. Twitter shareholders are hoping this deal is a long-term catalyst for the Twitter stock price.
Here's more on the deal and its possible impact on the TWTR stock price.
Back in April, Twitter paid $10 million to stream 10 NFL games on Thursday night. Viewers can stream the games via Twitter's website, mobile app, or apps on other platforms that support Twitter.
When the deal was first announced, it seemed like it would provide Twitter with more revenue and more users.
The first Thursday Night Football game of 2016 between the Buffalo Bills and New York Jets reached 2.3 million users globally, according to the NFL. It had an average watch time of 22 minutes per viewer.
According to Forbes, ad packages for all 10 games range in cost from $1 million to $8 million. If Twitter sells just one ad package at $1 million, it will have paid for the entire deal with the NFL. By selling just one ad package at $8 million per game, Twitter would have made $70 million on top of its initial investment.
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In all, there are roughly 15 ad spots Twitter can sell for each game. Advertisers so far include Anheuser Busch Inbev SA (NYSE: BUD), Nestle SA, and Sony.
In terms of short-term revenue, this deal should boost the Twitter stock price in the short term when the company reports Q3 earnings results in October.
But Money Morning Technical Trading Specialist D.R. Barton doesn't think Twitter's strategy makes a whole lot of sense. In fact, there's one major flaw in the plan that will prevent the Twitter stock price from climbing long term...
Barton told CNBC World on Sept. 15 that in the short term, Twitter is trying to create more brand awareness.
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But in terms of adding more users, Twitter's strategy has major holes.
"You don't even have to have a log in or Twitter account," Barton said. "I think it is a flaw in the strategy right now."
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Twitter may be bringing in ad revenue from Thursday Night Football, but advertisers are more attracted to the NFL viewing audience than Twitter's audience.
According to Forbes, 48.1 million people watched at least one minute of the Sept. 15 game on television. But that doesn't mean any of them had to actually sign up for Twitter.
And that's going to be a problem for TWTR shareholders. You see, Twitter's biggest problem right now is user growth...
From Q4 2015 to Q1 2016, user growth grew just 1.6%. It was even worse in Q2, when user growth was less than 1%.
In comparison, Facebook Inc. (Nasdaq: FB) grew its user base 1.8% in Q1 and 3.6% in Q2.
The more users a social media company has, the more advertisers are willing to spend. And social media companies make the majority of their money from selling ads on their sites. For Q2 2016, 88% of Twitter's revenue came from advertising.
And the poor user growth has caused the Twitter stock price to drop 30% in the last 12 months.
With Twitter not requiring people to log in or sign up for its streaming games, it can't increase its user base. A smaller user base means less advertising revenue.
According to FactSet, analysts have a one-year target of $16.70 for the Twitter stock price. That means Twitter stock could fall 10% from today's opening price of $18.52.
The Bottom Line: The Twitter stock price has not significantly climbed from streaming Thursday Night Football games. In the short term, Twitter should boost its revenue totals from selling ad space from the deal. But overall, Twitter has not executed a way to add more users through the deal to it make it a more attractive platform to advertise on.
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