Twitter shares took a drive on Monday after another the company announced that another top executive was departing. However, the stock rallied today after an analyst suggested that the latest deal with Google could add as many as 3.5 million incremental visitors to Twitter.
Concerns about user growth at Twitter
Since Twitter went public, Wall Street has been obsessed with the apparent user growth issues on the micro-blogging platform. That obsession continues, and apparently investors are encouraged by the possibility of a reacceleration of user growth thanks to Twitter’s deal with Google to include tweets in search results.
Canaccord Genuity analysts Michael Graham, Austin Moldow and Ryan Wallace conducted a recent survey in order to get some indications of if and how the Google deal might help Twitter. After analyzing the results of their survey, they reiterated their Buy rating and $52 per share price target on the micro-blogging platform.
Here’s what the integrated tweets look like in Google search results (All images in this article are courtesy Canaccord Genuity.):
Can Twitter reaccelerate its user growth?
The analysts think Twitter’s deal with Google could be one of its most important moves in terms of user growth acceleration, especially because there could be some lag time between the rollout of new products and growth. They expect the near term impact of the Google deal to be “modest” but believe that it will get better as time goes on.
The Canaccord Genuity team notes that Google pulls in the most traffic of any other online property on both mobile and desktop. On Google’s mobile U.S. search properties alone they see the opportunity for 100 million monthly users to be exposed to Twitter content.
Google phasing in Twitter integration
The analysts’ survey indicated that so far, 54% of search queries have Twitter integration. At this point, we’re only a few weeks into the two companies’ partnership. They said Twitter has officially proven itself as a news content provider as 90% of news-related searches turned up tweets. Only about half of music-related searches brought up real-time tweets, but those that did ranked the tweets highly.
Tweet ranking expected to rise
In addition to checking how many queries have Twitter integration, they kept an eye on where tweets rank in Google search results. They report that on average, real-time tweets are ranked at about 4.5 in Google search results. This is an important number because the lower the ranking, the less likely users are going to click on it.
The Canaccord Genuity team reported that, using third-party SEM data, links that ranked at the top on mobile devices have a more than 30% click-through rate. The second-place spot dropped to about 15%. At the average ranking of 4.5, the click-through rate drops to 7%. The analysts believe that, over time, the ranking of tweets will increase slowly “as relevancy and real-time events garner more clicks from searchers.”
Eventually, they think that 1.4 billion U.S. smartphone searchers on Google could possibly click through to Twitter, and they also see further upside “due to the interactivity and enhanced format of these Tweet search results.”
More opportunities for upside
The analysts also think that this is just phase one of Twitter integration in Google search results. Once the integration is rolled out more broadly, they expect Twitter’s reach and the performance improvements in the Google-integrated tweets (through higher and more frequent rankings) to improve.
In fact, they expect the integration could add about 3.5 million more visitors to Twitter from Google just in this first phase. Eventually, they expect the partnership to add more than 40 million visitors to Twitter.
Twitter aims to monetize
They didn’t find any ads on Twitter’s landing pages after clicking through the tweets that showed up in Google search results. Eventually, they expect the micro-blogging platform to monetize them. They also noted, however, that clicking on Facebook or LinkedIn links in Google search results also doesn’t bring up any ads because it’s a bit harder to monetize in this area because there is no right rail advertising on mobile devices due to the much smaller screen compared to desktops.
As of this writing, shares of Twitter were up 5.26% to $36.01 per share.
