Twitter Takes On Facebook Officially In E-commerce Race!

  • Twitter has officially announced that it is testing its 'buy' feature.
  • Twitter will be taking on Facebook in its e-commerce foray.
  • Twitter is risky at its current valuations and Facebook is relatively more attractive.

Twitter's e-commerce ambition is now official

In July this year, we had written about how Twitter (NYSE:TWTR) was testing the e-commerce waters with its “buy now” button. A recent Twitter blog post has made it official that the company is testing the feature on a “small percentage of U.S users (that will grow over time)”. It is now well known that social media biggies Facebook (NASDAQ:FB) and Twitter are both mulling a foray into e-commerce. We’ll look at Twitter’s recent announcement briefly and move on to comparing some of Twitter’s key user numbers with those of Facebook.

Facebook & Twitter Introduce Purchase Features

In mid July 2014, Facebook officially announced that it was testing a “buy” button on its site. For Facebook, the progression is probably natural. A number of stores are listed on Facebook and sell their products on the site. So, it was probably only a matter of time before Facebook would take note of the e-commerce potential of the platform. Though Twitter had been reportedly exploring the potential of a similar feature, the official announcement was posted on its blog on 8 Sep 2014.

Twitter and Facebook e-commerce features

Twitter’s e-commerce Feature

The new feature will allow users access to offers and products which “they can’t get anywhere else” and allows them to buy these products directly from the tweet without exiting the app. The feature will be available for Twitter apps on Andriod as well as iOS platforms.

Going by the language in the blog post, Twitter will be playing the role of a 3rd party selling platform and will be keeping out of delivery and related logistics. The company will probably look to earn commissions on the sales completed on the app.

Boosting Monetization Rates Is Critical For Twitter

The move is good for Twitter on multiple counts. For starters, Twitter already has a strong presence on mobile platforms. In Q2 2014, the company generated over 70% of its revenue on mobile devices. It makes sense for Twitter to try and leverage this strength further in as many ways as it can.

Further, questions are still being raised about Twitter’s user growth and engagement. To briefly summarize, about 11% or 30 million of its active users accessed Twitter solely through third party apps. The fact that these users didn’t access Twitter’s mobile app or website reduces the number of users to which it can serve ads, a negative for advertisers. On the other hand, at least some part of the rebound in user engagement in Q2 is attributable to the FIFA World Cup.

Where Twitter has been great is in its user monetization, and the same has propelled the company’s revenue growth. If user growth doesn’t really pick up pace, Twitter’s dependence on monetization improvement will increase. The foray into e-commerce could serve as another window to monetize its existing user base and boost engagement levels on the platform.

Facebook vs Twitter User Numbers

As one would imagine, when it comes to user related numbers, the scales tilt in favor of Facebook.

Twitter

Facebook

Monthly Active Users (millions)

271

1320

% of Mobile Users

76%

81%

Active Mobile Users (millions)

206

1070

Probably the one aspect where Twitter leads Facebook is revenue generated on mobile devices. While Twitter generated about 72% of its revenue on mobile, Facebook generated about 62% of its ad-revenue on mobile devices in Q2 2014, up a fair bit from 41% in Q2 2013.

Facebook seems to be better placed than Twitter, given its larger user base on both desktop and mobile platforms. Further, the fact that there already is some e-commerce activity on Facebook could be an advantage. However, the outcomes of these initiatives will be seen only over the coming quarters.

Facebook & Twitter Valuations

Facebook’s Price to Sales ratio of 20 is much lower than Twitter’s Price to Sales ratio of 31. Given its higher revenue, user base and profitability, Facebook is more attractive at these valuations. With concerns over Twitter’s user growth and lack of profitability, the stock is a risky bet at its current valuations. Our Twitter stock analysis and Facebook stock analysis videographs cover more aspects of the two companies and their fundamentals.

Show Full Article
5 2
Is this article helpful ?    


Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

show more

Comments on this article and TWTR stock

Do share this awesome post