The Twitter stock price (NYSE: TWTR) is up more than 10% in the last week, following news that the social media company is more than doubling its advertising efforts in Europe.
TWTR announced on its blog Aug. 26 that it’s expanding its advertising network to 12 additional countries in central and Eastern Europe, citing “tremendous growth” in the area during the last year.
Before that announcement, the ads had been available in eight European countries. Overall, Twitter Ads are now available in 35 countries throughout Europe, Africa, and the Middle East.
“We’ve heard positive feedback from brands around the world about how our recent product developments have helped accomplish goals like driving engagement or direct-response actions like website traffic, video views, leads and sales,” the company wrote on its blog. “Since 2013, there have been significant enhancements to our suite of creative, measurement, and targeting tools…”
Twitter Ads allow companies and individuals to buy advertising packages that include promoted videos, campaign tools, tweet activity dashboards, mobile app promotion, and television conversation targeting. The most popular form of advertising on Twitter is “promoted tweets” which allows advertisers to display paid tweets on users’ feeds.
Ads are also a huge portion of Twitter’s revenue, accounting for nearly 90% of sales.
TWTR’s strong advertising growth was on display in its last earnings call, when the company reported revenue of $312 million in the second quarter, an increase of 124% from the previous year.
That revenue growth has been Twitter’s prized statistic since going public. In April and February earnings reports, TWTR announced that revenue had grown 116% each quarter, compared to the previous year.
But despite triple-digit revenue growth every quarter, the stock spent much of its first six months foundering.
Following an initial 188% first-month gain in December, TWTR had a disastrous next five months. By May 23, TWTR had dipped as low as $30.50, a nearly 60% drop.
Since then, the Twitter stock price has rebounded nicely, up nearly 70%. Today, shares are nearly double their $26 offer price.
Interestingly, the stock’s volatility happened at a time when TWTR was routinely posting revenue growth and beating earnings estimates.
But where revenue growth failed to drive the Twitter stock price higher, here are a couple factors that could trigger big TWTR gains into 2015…
What Could Send TWTR Soaring
When TWTR reported its second-quarter earnings at the end of July, the stock jumped 30% in after-hours trading because the company announced a 24% jump in monthly active users (MAU) to 271 million. In the prior quarter, Twitter had MAU growth of just 5.8%.
For Money Morning’s Defense and Tech Specialist Michael Robinson, continuing that growth is the first step for Twitter.
“I want to continue to see growth in their global user base,” Robinson said. “They also need to show that they can continue to monetizing their users. I think that revenue growth-per-user is going to be very important over the next 18 months.”
At the end of 2013, Twitter had yearly revenue of $665 million and 241 million monthly active users. That’s a revenue-per-user of roughly $2.76 per user.
But it’s not just advertising and user growth that will push TWTR stock…
“One area that will be interesting is the Big Data aspect,” Robinson said. “Twitter is a goldmine for data with the number of users and tweets they have. Twitter has tons and tons of data, almost an incomprehensible amount. I want to see how they can monetize all that data.”
Twitter has made several acquisitions in the Big Data industry, including the firm Gnip, which packages and sells massive amounts of data from large companies. Twitter doesn’t generate a lot of revenue from data, having made $70 million of data licensing payment in 2013. However, that revenue stream is growing. That 2013 total was up 48% from 2012.
Tapping further into the Big Data market could be huge for Twitter, given the amount of tweets sent every day. During the FIFA World Cup this summer, more than 652 million tweets were sent regarding the tournament alone.
When it comes to TWTR’s next earnings report in September, Robinson says to look for improvement in the company’s operating margins, sales, and further international expansion.
Twitter stock price rose 2.55% yesterday (Tuesday) to hit $51.02.
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