Post-IPO, Twitter U.S. Growth Remains Key Question


With its strong market debut on Thursday, Twitter showed investors are banking on the microblogging service to become a profitable, multibillion dollar-a-year player in the mobile/social space in the years ahead.

The company’s ability to meet high investor expectations for growth, or not, will hinge largely on its adoption and usage across mobile devices.

In its IPO filing last month, Twitter revealed three-quarters of its active mobile users access the service from a mobile device, and nearly two-thirds (65%) of its revenue comes from the mobile side. “Mobile has become the primary driver of our business. Our mobile products are critical to the value we create for our users, and they enable our users to create, distribute and discover content in the moment and on-the-go,” it stated.

But despite the hoopla surrounding the Twitter IPO, and the new book about the company’s founding, only 16% of U.S. adults are using the service, according to data released earlier this week by the Pew Research Center’s Internet & American Life Project. That figure has hardly changed from the 15% last year. By contrast, about 47% of Americans are on Facebook.

Given the mobile-centric nature of Twitter, one would expect it to have higher reach among smartphone users. And it does. But it’s still well behind powerhouses like Facebook and Google, as well as smaller competitors like Instagram, according to the latest comScore data

Twitter hovers just outside the top 15 U.S. mobile properties across both the mobile Web and applications. At the top of that list in September was Google, with reach of 90%, followed by Facebook (84%) and Yahoo, (82.2%). At No. 15 was the Weather Company, with 31% share, with Twitter one spot back, with 27.8% reach. That's down from 29% in August. 

Looking just at reach among apps, Twitter ranked No. 14, with 21.1% reach. Facebook was tops in the app category, with 74.3% reach, with Google Play and Google Search, each at about 53%. Also ahead of Twitter were popular apps like YouTube (50%) Pandora (49%) and Instagram (26%).

While more than three-quarters (77%) of Twittter’s users are outside the U.S , only a quarter of the company’s sales come from international markets. Twitter has said it plans to ramp up advertising overseas by taking steps such as extending its self-serve ad platform to other countries. But it also acknowledges that it faces a host of international competitors, including Line In Japan, WeChat in China and Kakao in South Korea.

That means being able to set itself apart from other messaging apps and social platforms. “We think one of the biggest wild cards around growth relate to how Twitter is ultimately used by marketers around the world and how well it establishes itself as uniquely good for certain sets of media goals for certain sets of advertisers,” stated Brian Wieser, senior analyst at Pivotal Research Group, in a research note on Friday.

He suggests that as long as Twitter remains a niche medium, appealing to a passionate, if smaller audience, it will have a user base perhaps a third the size of Facebook’s. As a result, Pivotal’s baseline expectation is that “eventually Twitter can monetize itself in the very long-run in relative proportion to Facebook at a conceptual one-third level,” wrote Wieser.

So despite a first-day closing price ($45), which valued Twitter at 20 times expected 2015 sales (while Facebook trades at only nine times that level), don’t expect Twitter to ever become a behemoth on the scale of Facebook. 

With Twitter's share price closing 7% down from Thursday, a degree of sobriety may already be setting in. 

Business man holding smartphone photo from Shutterstock

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