How Much Can Twitter Grow Its ARPU In The Near Term?

by Trefis Team
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Twitter
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Twitter (NYSE:TWTR) primarily derives its revenues from advertising and data licensing. As its platform continues to be used for breaking news and other matters of importance – and the broader public continues to increasingly participate in dialog surrounding such matters – it should continue to witness significant user engagement. Growing user engagement is likely to be leveraged by advertisers and influencers alike to help Twitter witness solid growth in its ARPU. We forecast y-o-y ARPU growth of nearly 5% for 2019.

We have created an interactive dashboard on Twitter’s Near-Term ARPU Growth. You can modify any of the key drivers to visualize the impact of changes on the company’s revenue and ARPU estimates, and see all of our Technology company data here.

In light of the privacy scandals that have plagued the broader social media universe, Twitter’s early acknowledgement of user health issues on its platform helped the company manage market expectations. Furthermore, the company’s Q4 results came in ahead of market expectations. Going forward, in addition to Twitter’s continued initiatives towards improving its platform health and a potential shift in marketing budgets from Facebook to Twitter, we expect the following factors to contribute to better monetization of user engagement on Twitter’s platform:

  • Election-based spending throughout the world in 2019 and 2020 should drive engagement, and in turn ARPU
  • Geopolitical events (such as Brexit, credit crisis in Italy, Mexico wall issues, U.S.-China trade issues, U.S Presidential and Federal Reserve disagreements, among others) and related commentary will also drive engagement
  • Twitter’s focus on platform health promoting increased organic usage to help become the platform of choice for news and broader conversations should attract advertisers’ attention.

While the potential from crackdowns on bots and bullying, and disruptions due to regulations (such as the GDPR), can have a near term impact on Twitter’s revenue, the actions it has taken in the last couple of years should help reduce the frequency of such disruptions going forward.

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