Twitter's Massive International Opportunity


Source: Twitter.

Unlike Facebook's lovely 50/50 split in international/U.S. and Canada revenue, Twitter makes the majority of its money in the U.S. Twitter's international revenue may be small, but it also sets the stage for one of the social platform's biggest opportunities.

International horizons
In Twitter's S-1, the company highlights one of its major challenges in the risks portion of the filing: "If we fail to expand effectively in international markets, our revenue and our business will be harmed." Approximately 23% of Twitter's monthly active users come from the U.S. and account for about 75% of the company's sales, highlighting Twitter's dependence on the U.S. market for revenue. Twitter names its international challenges: "[C]ompetition, advertiser demand, differences in the digital advertising market and digital advertising conventions, as well as differences in the way that users in different countries access or utilize our products and services." The list is daunting.

Sure, international markets will likely prove to be trying. But aren't international markets also one of Twitter's most important avenues for growth? Looking at the situation from a different angle paints a picture of a massive opportunity: 77% of Twitter's users come from outside the U.S. and account for just about 25% of the company's revenue. What if Twitter could better monetize those users?

In fact Twitter looks like it's already on the path to rapid monetization of international users. If Twitter's seven quarters of data on international ad revenue per 1,000 timeline views is any indication of how the company may do internationally in the future, investors should expect plenty of international revenue growth.

Source: Data retrieved from S-1 filing.

In Twitter's most recent quarter, the company grew international ad revenue per 1,000 timeline views by 111%, year over year. That's considerably faster than 50% year-over-year growth in the U.S. during the same period.

Following Facebook's lead
Taking a look at big brother Facebook provides some hope. The company has boosted its international revenue (all revenue outside of the U.S. and Canada) from 38% of revenue in the first quarter of 2010 to 49% today. While this growth is partly attributable to an increase in international users as a percentage of total users, it's also attributable to an jump in international average revenue per user during this period. In fact, in Facebook's most recent quarter, average revenue per user hit all-time highs in its Europe, Asia, and rest of world segments.

Sure, Facebook and Twitter have their differences -- but the two advertiser-reliant social platforms have enough in common for Twitter investors to have some interest in Facebook's international success. It could be a hint for what's to come at Twitter.

It's inevitable
Given Twitter's most recent year-over-year growth rate in international ad revenue per 1,000 timeline views of 111%, the company's international revenue is likely to continue to grow at rapid rates in the near future. Of course, investors shouldn't expect Twitter to maintain those exact growth rates, but investors shouldn't underestimate the opportunity, either. With international revenue accounting for 25% of total sales, anything close to triple-digit growth rates will likely have a meaningful impact on Twitter's total revenue growth for at least the next several years.

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