How Much Will International Segment Contribute To Twitter’s Top Line Growth?

45.08
Trefis
TWTR: Twitter logo
TWTR
Twitter

Twitter (NYSE:TWTR) reported a massive growth in revenues in the first half of the decade, driven by a rapidly expanding user based complemented by the company’s ability to effectively monetize that user base. Twitter’s global user base surged from just over 40 million to over 200 million monthly active users (MAUs) in the first half of the decade, while average revenue per user (ARPU) rose from 65 cents per user to $7.30 in the same period. However, growth rate of both these metrics slowed down in 2016 and 2017. MAU growth slowed down to low single digits, particularly in the U.S., while ARPU growth actually declined in 2017.

Based on recent market trends and the near-term outlook provided by the company’s management, we forecast Twitter to report 6-7% revenue growth in the next two years from $2.45 billion in 2017 to $2.78 billion in 2019. Of the $335 million added to net revenues, we estimate that the company’s international segment will contribute around $175 million, or over 52% of the incremental revenues. We arrive at this estimate from Twitter’s key growth metrics such as MAUs and ARPU. We have summarized our expectations on our interactive dashboard platform. If you disagree with our forecasts, you can change the key drivers for Twitter’s international segment to gauge how changes will impact its expected revenue. 

Relevant Articles
  1. Twitter Stock Gained 9% In One Week, Where Is It Headed?
  2. Twitter Stock Posted Weak Results In Q2, What To Expect Next?
  3. Company Of The Day: Twitter
  4. Company Of The Day: Twitter
  5. Is Twitter’s Stock Undervalued At The Current Price?
  6. What’s Next For Twitter’s Stock?

Estimates for Key Growth Drivers

Over the years, Twitter’s U.S. segment has been the largest contributor to net revenues. However, the contribution from the U.S. segment to Twitter’s top line has consistently gone down as the user base growth has somewhat saturated. Twitter’s management believes that future growth in MAUs is largely expected from international markets, particularly Canada, France, Germany, India, Japan, Mexico, the Philippines and South Korea. As a result, we forecast the total MAUs to increase at 5-6% to 286 million by 2019 from under 260 million in 2017.

On the other hand, ARPU in international markets (<$4) is much lower than Twitter’s ARPU in the U.S. (>$20). This means that there is a strong potential to increase this going forward. In the next two years, we expect international ARPU to increase from $3.97 in 2017 to $4.21 by 2019. Consequently, Asia-Pacific revenues are expected to increase at 8-9% in the next two years to over $1.2 billion by 2019.

What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Research

Like our charts? Explore example interactive dashboards and create your own