Wall Street rejoiced Wednesday about Twitter's better-than-expected earnings, sending its shares up sharply.
"It's a pretty interesting, and tough and brutal game for anybody who's not Facebook and not Google," McNealy told CNBC's "Squawk Box." "They're owning so much of the digital advertising space. And
McNealy is now chairman and CEO
"It's kind of a black box, and advertisers I talk to — the big brands — are very frustrated that they don't really know how many clicks they are getting," McNealy said. "They're not getting the data back."
Twitter reported earnings of 11 cents per share on revenue of $548 million, better than the penny per share on revenue of about $512 million that was expected by a Thomson Reuters consensus estimate.
Its premarket stock price was more than 9 percent higher.
But overall, Twitter's earnings and revenue are on the decline from last year, and the company's outlook was bleaker than analyst forecasts, as the company is "phasing out less effective ad formats."
"You have the issues with the advertisers, where they don't trust the content on there," James Cakmak, internet equity research analyst at Monness, Crespi, Hardt & Co., told CNBC ahead of the earnings release. "Fake users, the harassment issue. If you purge
Twitter has ambitions to stream live video programming all the time, according to BuzzFeed News. But so far, it has been losing steam to competitors.
Snap, newly public, is growing super fast: Revenue was $404.48 million in 2016, up from $58.66 million in 2015. And Snapchat has high engagement, especially among teens. Amazon, meanwhile, has deepened its push into "over-the-top" video content, announcing this month an exclusive partnership to
"Targeting was supposed to be the holy grail, but all we're doing really is doing the same kind of advertising you see on TV: 20, 40, 60-second spots," McNealy said. "That really hasn't changed the game."
Facebook's Mark Zuckerberg has made big acquisitions and
Cakmak said Twitter's ad team may be too focused on winning TV advertising dollars.
"With a brand ad, it's all about trying to get to a mass market," Cakmak said. "[Twitter's] ads and their team are mismatched with the skillset and the niche-ness of the model, which should be
McNealy said he's working with Twitter on "brand experiences," using
"Experiences are where you can actually interact — it's not, 'Lean back and watch a video,'" McNealy said. "Everybody who is watching advertising today has a keyboard, a touchscreen, a speaker and a microphone. So now you can engage."
— CNBC's Julia Boorstin contributed to this report