What Will Drive Growth In Twitter’s Timeline Views Per User?

Twitter’s (NYSE:TWTR) stock has fallen significantly in the last few months. The slowdown in user growth and a slight decline in the number of timeline views per user in Q4 2013 have been the primary reasons behind changed investor sentiment. However, we believe that Twitter has opportunities to help it drive long-term growth in the number of timeline views per user, which is one of the important drivers determining the company’s value. Our price estimate for Twitter could go up by 15% if the number of timeline views per user for the U.S. increase from a little over 3,200 in 2013 to 5,000 by the end of our forecast period. Our current price estimate for Twitter stands at $28, which is a discount of about 25% to the market price.

See our complete analysis for Twitter

Twitter is gradually becoming a web utility

Twitter continues to attract individuals, corporations, celebrities and world leaders. The ability to quickly transmit information to a relevant audience is something that makes the platform unique. We believe that more users will realize this unique selling proposition and join the platform. Additionally, marketers are able to engage in direct conversations with their potential customers, promote their service and brand more effectively, and stay abreast of the latest industry developments. Ninety four out of the top 100 Ad Age advertisers marketed themselves on Twitter in 2013. These advertisers are getting attractive returns on investment as they can leverage Twitter’s data to effectively target their ads to the relevant audience. The benefit is not just limited to the initial targeting – due to the  ‘retweet’ feature and the viral nature of the platform, these ads or promoted tweets tend to get distributed to a much larger audience for no additional cost. It is highly likely that these advertisers will continue to push for more engagement and relevant ads, thus driving timeline views per user up.

However, as is the case with any technology, the early adopters are generally the heaviest users. Therefore, Twitter’s new users will be relatively less engaged with the service, which can act as a mitigating factor against the growth in number of timeline views per monthly active user.

Rich media experience will improve user engagement

Twitter Cards is a relatively new feature that lets customers include images and videos in their tweets. A big part of Facebook’s success can be attributed to the ability of users to share pictures and videos, with the company even acquiring photo sharing service Instagram to improve user experience. This is a strong example of how interactive and rich media can increase user engagement. Twitter cards should help increase the number of timeline views per user.

Live events, news and shows will encourage more interaction

Twitter has mentioned that user engagement significantly increases during certain live events, shows and breaking news. As this trend catches on, we expect users to interact more and exchange views and opinions, thus increasing the the number of timelines views per user. Users are increasingly turning to Twitter to follow news and politics, which will require constant timeline refreshes to get the latest updates. According to a survey, about 50% of U.S. adult Twitter users stated that they get news through the platform.

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