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Twitter’s Video Ads Are on the Rise, but Revenue Growth May Slow

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Twitter’s user base is shrinking but top-line growth remains solid

Social media company Twitter (TWTR) continues to see robust growth in its revenue even though its monthly active user count is shrinking. Twitter’s efforts to weed out users that violate its policies may be weighing on its user base, but the move may be pleasing advertisers, as they prefer to post their ads next to positive content. Thus, Twitter’s efforts to delete malicious accounts could be paying off as suggested by its robust revenue growth and a fifth successive quarter of net profit. 

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Video ads now make up 55% of Twitter’s total ad revenue

Another factor that has contributed to Twitter’s growth is its video ads, which, according to eMarketer, represented 55% of Twitter’s overall ad revenue. Twitter said after reporting its fourth-quarter earnings that video was the company’s fastest-growing ad format.

While the company’s monthly active users (or MAU) are shrinking, its daily active users are seeing positive growth, although even that is decelerating. The company will soon start reporting only mDAU (monetizable daily active users).

Why Twitter’s revenue growth could decelerate

An increasing proportion of mDAU to MAU suggests that users are spending more time on the platform. However, that ratio is much lower than the ratios of Snapchat (SNAP) and Facebook (FB). eMarketer projects that the company’s ad revenue growth will slow down from an estimated 19.6% in 2018 to 11.1% in 2019. Twitter’s stock is trading roughly flat in the last 12 months.

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