- Twitter reaches out to Google to help it increase traffic to its site. The move allows Twitter to monetize unregistered users.
- Twitter targets $14 billion of revenue by 2024.
- Twitter stock analysis based on partnership with Google.
Twitter (NYSE:TWTR) and Google (NASDAQ:GOOGL) have signed a new content indexing partnership, which is an improvement on the previous partnership that ended in 2011. At its recent earnings call, Twitter made an interesting announcement of a new deal that will allow the company to accelerate its new user acquisition and ad revenue. Google will on its part have direct access to tweets so that it delivers real-time content to web users. Twitter has not confirmed whether the new partnership with Google will roll out globally when it starts in the next couple of months, but it is likely to be available worldwide.
The previous agreement between Twitter and Google ran between 2009 and 2011 and was not renewed because a former Twitter COO, Ali Rowghani, sought more control over their data shared with Google. Let us do a Twitter stock analysis based on the impact this new deal will have on the microblogging site.
Attracting More Users
Under the latest partnership, registered Twitter users will have Google directing them to their individual accounts when they perform a Web search. For the unregistered Twitter users, Google will shuttle them to a new homepage where they will encounter engaging content and display ads. The reason Twitter has decided to once again license its data to Google is that it wants to attract more people to its platform.
On the other hand, the partnership is expected to bolster Google's search results with real-time data. The company will be able to serve ads against the time-sensitive content. However, the impact on Google will be relatively smaller and does not add as much weight to Google stock analysis as compared to what Twitter stands to gain from the partnership. The reason Google may not see a huge impact is that Twitter currently has just a few hundred million users while Google processes billions of search queries on a daily basis. The greatest deal for Google in the partnership is access to real-time tweets against which it serves ads.
Twitter’s new homepage will be a great platform for the company to get more from users who do not already have an account with it. The company disclosed that it has more than 500 million unregistered users who access its website every month. Google will be able to help Twitter increase the number of the unregistered users reaching its website so that it can monetize them. This is important because in the previous partnership with Google, Twitter did not have a page specially designed to encourage unregistered users to return or sign up for an account.
Google will be able to drive more unregistered users to the new Twitter homepage where they will have access to interesting content and learn about the value of Twitter so that they can become registered users.
Twitter can monetize unregistered users at half the rate of the registered ones, according to the company’s current CFO, Anthony Noto. Given that the company’s unregistered visitors are nearly double that of registered users, Twitter could double its revenue by prudently monetizing the unregistered users that Google channels to its new homepage.
Moreover, a fraction of the visitors that land on Twitter’s new homepage if sign ups for an account it would help shoot up the active user base of Twitter. In fact, that has become the main focus for the company’s investors. Twitter finished its fourth quarter with 288 million active users, the number edged up slightly by 4 million from the previous quarter; however, investors expected more than 4 million new additions for the quarter.
Twitter Revenue From Ads Has Increased Significantly
Twitter reported $479 million of revenue in the fourth quarter, up nearly 97% over the same quarter in the year ago period. Analysts estimated revenue of $453.1 million for the quarter. The company is clearly not having problems in growing revenue. In the third quarter, Twitter generated $361.3 million of revenue, which was more than double of $168.6 million in the comparable quarter a year earlier.
Top Revenue Internet Company
Twitter dreams to be one of the top revenue generating Internet companies in the world. The company has its eyes set on generating $14 billion of revenue in 2024, up from $1.4 billion last year. Given the huge gap between where the company’s revenue stands right now and the where its target is, Twitter will have a lot of work to do to hit the ambitious target. That work will require more than adding eyeballs, but also aggressively monetizing content and diversifying revenue sources.
It is no wonder that Twitter also announced a content syndication deal with Flipboard and Yahoo Japan. It will promote tweets on the services so that its advertisers can have a wider audience and pay more for advertising. Twitter intends to expand the content syndication program with more providers. The company will be able to share revenue with those who syndicate its content.
The announcement about the new partnership with Google came just about a day after Twitter disclosed the content syndication arrangement with Flipboard and Yahoo Japan. The partnership with Google seems to be one that would bring direct revenue and traffic to Twitter because the company is licensing its data to Google.
Adding New Features
The partnerships that Twitter has signed to promote its tweets will make more sense as the company continues to push out more features to keep users engaged so that they spend more time on the platform. The company recently added a native video recording app that allows users to capture video clips, edit, and share them with the public without having to leave Twitter's website.
Social media companies are looking to video as a way to pull audiences from TV screens to their platforms. The implementation of video on social platforms is also expected to pull more advertisers online where they can easily target their ads for better returns.
Twitter has more opportunities to improve and monetize its platform and diversify revenue. The agreements with Google, Flipboard, and Yahoo Japan are just the beginning of what is possible for the company. An important area for Twitter to make money that is also worth mentioning is the e-commerce, especially the sale of time-sensitive items such as tickets. The company could reach out to more companies that want to sell such time-bound items to use its real-time platform so that it generates incremental revenue.