Matthew Yglesias is on vacation.
The IPO price tags, which were as low as $17 a share and this morning rose to $26, were only ever available to a few lucky investors. The IPO popped before regular investors ever had a chance, and actually started trading at $45.10 a share. As of this article, it’s balancing right around $46.
There are myriad analyses of what the company will be worth, where the stock should be, and why everyone else is dumb. That’s a recess mud pit that’s doing fine without more mud. Instead, let’s look at Twitter’s plausible markets moving forward. Considering Business Insider’s scoop yesterday—that Twitter’s claimed 232 million “monthly active users” may actually reveal that 651 million accounts have gone dark—expansion of the user base is an absolute must. Twitter’s CEO had been hoping to hit 400 million active users this year.
Moving forward, Twitter can’t rely on the United States. And it already knows that: According to Business Insider, “Twitter had only 49 million monthly active users on average during the second quarter of this year.” While that sounds like a lot of room for expansion, it had only grown by one million users from the previous quarter. Twitter’s forest-fire growth in the U.S. is over. AllThingsD collected the critical stats: “In the third quarter of this year, Twitter’s active user base grew by 39 percent over Q3 2012. In Q2, Twitter’s year-over-year growth rate had been 44 percent.” And here’s a good write-up on how social networks are duking it out in America (note that the graph there is logarithmic, so the competition isn’t as fierce as it first appears).
Unfortunately for Twitter, its total growth is decelerating. Q3 growth was only 6.13 percent, Q2 6.9 percent, and Q1 10.3 percent. You might want to step away from the stock before Q4 rears its head: In 2010 and 2009, the fourth quarters from 2010 and 2011 both saw halved growth relative to their respective third quarters.
So where will Twitter turn to grow its user base? A report on 2011 usage by country, created by the social media analysis firm Semiocast, is illuminating. It has some interesting findings, namely that while the U.S. had 28 percent of all Twitter users, it was actually fourth by percentage of accounts that “posted a message between September 1st 2011 and November 30th, 2011.” (The report was released in 2012, and unfortunately it’s the most recent.) This is a compelling statistic—even if outdated—because it bypasses Twitter’s dark account problem and it measures engagement. Both are critical for Twitter to keep up the virtuous cycle that is social media content creation and advertisement value.
Which countries beat the States? Netherlands was first by a long shot, then Japan, then Spain. Above average, but less than the U.S., were Indonesia, Venezuela, Canada, and the United Kingdom. Japanese follows English as the most popular language on Twitter as of the study.
If Twitter’s expansion continues to slow, these market-by-market battles and the engagement of users in them are going to be a major factor in determining where Twitter is heading.
At 127 million people, Japan has twice as many people as the Netherlands and Spain combined. Because of its size and seeming enthusiasm, Japan may be the place Twitter needs. But on top of American giants like Facebook, Japan has yet another, local social media competitor: Line, which offers a fairly comprehensive set of communication options to its users. The company, started in 2011, already has 270 million users, and according to Reuters, 80 percent are outside of Japan. And they’re thinking about an IPO next year.
Undoubtedly, there are more places to expand than the countries discussed above. Twitter could attempt to reinvent itself in areas where it already has a reputation but few active users. For instance, Twitter is trying new strategies in India, which came last in Semiocast’s survey. Growing its market in countries that have already expressed a passion for Twitter would also be a natural strategy, but that would be an uphill battle.
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