Twitter is an interesting example of fluctuating infatuation. One week, critics are lamenting its lack of growth or aggressiveness. The next, Twitter is roundly praised for its gains and genius.
But according to a new report from JP Morgan analyst Doug Anmuth, Twitter has a rosy future, indeed.
“Even as questions linger about Twitter’s user growth, the microblogging service has continued to show strong ad gains this year,” says Mark Walsh of MediaPost. “Its revenue more than doubled in the second quarter to $ 312 million, partly due to a burst of advertising and activity around the World Cup.”
The new report suggests Twitter’s upward ad trajectory will continue.
“Twitter monetizes at roughly 50 percent the per user rate of Facebook today and we believe that gap will tighten over time,” explained Anmuth. “As monetization improves, we believe Twitter will realize greater margin expansion based on the user generated content nature of the platform and broader rollout of self-serve advertising.”
That led Anmuth to raise his rating of Twitter shares to “overweight” from “neutral.”
But Twitter may grow despite bumps in the road. Twitter — like Facebook — sometimes ticks off its tweeters. Back in August, for example, the company started to include tweets from accounts that users didn’t follow, based of course on what Twitter algorithms determined someone might like or find relevant. Users, naturally, tweeted their displeasure.
Nonetheless, Anmuth “expressed confidence in Twitter’s ability to accelerate user growth through recent steps to speed up “onboarding” of new users. These include being able to access a user’s contacts to increase follows, making more relevant suggestions for user follows and reducing steps in the sign-up process,” notes MediaPost.
As a result, JPMorgan upped its estimate of net user add-ons to 17 million in the third quarter. The company is forecasting that Twitter will have 600 million users globally by 2018.
Anmuth said he sees promise in trial experiments with new ways to segment content on Twitter by topics or themes like work, personal, and sports.
As ever, Twitter will ride the mobile platform wave. More than 75 percent of its users now come from mobile. So does that percentage of its ad revenue.