Growth in Twitter's Most Important Market Is Slowing
Hands down, the U.S. remains Twitter's most important market. Despite only making up about 30% of its monthly active users, or MAUs, last quarter, the U.S. accounted for 77% of the company's total revenue. But MAU growth in the U.S. has begun to slow, meaning Twitter's growth potential could come under pressure -- unless, of course, it finds ways to offset it.
Sources: Twitter and author's calculations. YOY = year over year.
Considering there are 245 million Internet users in the U.S., there seems to be plenty of opportunity for Twitter to grow its base of 53 million U.S. MAUs. After all, Facebook reported a healthy 199 million MAUs between the U.S. and Canada last quarter. The billion-dollar question is how Twitter plans to grow its U.S. user base to a much more substantial level -- and whether it will stick.
Easier said than done
Twitter can potentially fuel MAU growth in the U.S. by selling prospective users on the value of real-time public conversations and trending. In other words, Twitter may need to beef up its marketing efforts beyond word of mouth, which remains its biggest driver of MAU growth around the world. Naturally, selling potential users on this concept may prove to be easier said than done. But if Twitter can effectively show potential users the value of real-time conversations in our increasingly fast-paced world, a traditional marketing push may prove to be a worthwhile investment in slower-growing markets.
Removing the bottleneck
One of Twitter's biggest short-term challenges is how it transitions from a human sales force to selling advertising via automated channels. Currently, Twitter still relies on a human sales force in international markets and only recently began automating its ad business in the U.S. As you can imagine, this has created scalability issues and explains why Twitter's international revenue has been disproportionally lower compared to its user base. It's also why Twitter's ad business only has a presence in 20 countries throughout the world, despite the service being available in nearly every country. Eventually, this situation will likely be addressed, but at this time, it's still unknown when this will occur.
There is a path
Although MAU growth may be slowing in the U.S., Twitter should be more than able to offset this headwind with the introduction of a global automated sales force. Assuming there is pent-up demand for its international marketing services, the challenge will be how quickly Twitter can scale its international ad business and whether it can offset any potential user growth headwinds in the U.S.
Going forward, investors should continue to watch the rate of MAU growth in the U.S., as well any progress being made in its international ad business. Between the two, you'll have a good sense of how well management can deal with challenges.
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The article Growth in Twitter's Most Important Market Is Slowing originally appeared on Fool.com.
Fool contributor Steve Heller owns shares of Apple and Facebook. The Motley Fool recommends Apple and Facebook. The Motley Fool owns shares of Apple and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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