1 Big Reason to Buy Twitter Stock

Twitter Stock Is Materially Lagging Facebook and LinkedIn

Main Reason: Disappointing User Growth

Facebook gained 43 million monthly active users in the fourth quarter of 2014, ending the period with 1.39 billion monthly users.

LinkedIn added 70 million members, for a total of 347 registered users at the end of 2014.

Twitter gained 33 million monthly users in the fourth quarter of 2014, for a total of 288 monthly active users.

Considering its relatively smaller size vs. Facebook and LinkedIn investors are demanding faster user growth from Twitter.

The Trend Is Still Healthy, But Growth Is Decelerating

Initiatives to Accelerate User Growth

Simplifying the sign up process.

Providing a fully populated timeline for new users who don’t understand the Twitter language.

Improved group private messaging capabilities.

Increased focus on video content.

“Away” capabilities, meaning that users are shown potentially interesting tweets they may have missed while being away.

Building a large ecosystem of apps and services

Revenues: Twitter Is Outgrowing Both Facebook and LinkedIn

Twitter’s Big Growth Driver: Monetization

Twitter Is Making Massive Improvements in Monetization

The company has mostly focused on the user experience over monetization so far, so it has a lot of room to improve monetization.

The short message format is ideal for mobile devices, a crucial growth area in the industry.

Twitter is great for real time news, and traffic tends to spike during events such as the Super Bowl or the Academy Awards. This is a major plus for advertisers.

Monetization in international markets is roughly 20% of monetization levels in the U.S. There is significant room to increase global monetization.

Beyond Registered UsersAccording to management, nearly 500 million people visit the Twitter website or mobile app every month, but they don't log in. Even more impressive, the company estimates that Tweets embedded on other websites or apps generate an enormous 185 billion views per quarter.

Twitter is working on selling ads on other publishers' websites and apps

This could allow the company to profit from a much larger audience than registered users, producing a huge increase in monetization rates.

Key TakeawaysUser growth is important, and management needs to prove that it can deliver in that area.

However, it all comes down to revenue and profits.

Twitter is doing great when it comes to monetization, and the company is even outgrowing Facebook and LinkedIn on a sales basis.

Importantly, Twitter still has a lot of room to improve monetization, both by better leveraging its active user base and by expanding advertising beyond registered users.

Wall Street could be underestimating Twitter’s growth potential by putting too much attention on users versus monetization and revenues.

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