Twitter’s global challenge: 77% of its users bring in only 25% of revenue

Image Credit: Ideagirl Media

Twitter released its IPO S-1 documentation to the public today, and all kinds of internal company goodies are now on display for investors and the general public to poke, prod, and investigate.

Including the fact that Twitter’s international success, while impressive, is still bringing in only a fraction of its overall revenue.

Users outside the United States constituted a massive 77 percent of Twitter’s monthly average users, Twitter says in its S-1 filing. However, they provided only 25 percent of Twitter’s revenue. One of the major risk factors cited in the S-1 is exactly that: Increasing revenue from international users.

It’s not like there’s no hope.

In 2012, Twitter made $53 million from international revenue, representing just 17 percent of its total income. But in the first six months of 2013, Twitter pulled in $62.8 million internationally as overall revenue jumped to $253 million — a nice uptick to 25 percent. So Twitter is growing topline revenue from all over the world, which is good. Twitter has huge reach in many developing countries, with the company’s mobile app on no less than 64 percent of the iPhone in Indonesia.

But the problem is that those users don’t bring in the dough like U.S. or even European users.

It’s the same issue that Facebook has faced for years: A lower and lower percentage of U.S.-based users over time as the service grows, and a higher percentage of users in countries in Asia, South America, Eastern Europe, and Africa … where the sheer economics of personal income make revenue generation difficult.

As an example, in 2012, Facebook’s revenue-per-user looked like this:

  • US/Canada: $3.20
  • Europe: $1.43
  • Asia: $0.55
  • Rest of world: $0.44

Which means that massive overseas growth, while good, will have a negative impact on revenue per user, and, even in best-case scenarios where developing countries actually … develop … a lag effect on overall earnings potential.

Twitter knows all this, of course, and one of the risk factors cited in the S-1 documentation lays it all out: “Our inability to successfully expand internationally could adversely affect our business, financial condition and operating results.”

The company is hard at work on solving that problem, and seems to be focusing primarily on five developed countries with larger amounts of disposable income: Australia, Brazil, Canada, Japan, and the United Kingdom. In other countries, it is relying on resellers to bring its suite of promoted products to the market. Currently, the number of countries it has sold promoted products in via resellers or its own personnel is rather low — just 20.

So there’s lots of room to grow.


VB's working with marketing expert Scott Brinker to understand the new digital marketing organization. Help us out by answering a few questions, and we'll help you out with the data.
blog comments powered by Disqus