Why Have We Raised Our Twitter Forecast?

Why Have We Raised Our Twitter Forecast?

Increased engagement with politics and sports is driving video ad revenues

Twitter’s US ad revenues will grow 22.8% between December 2018 and December 2020, reaching $1.62 billion, according to our latest forecast. That’s considerably higher than our previous forecast, of 9.5% for the same time period.

What's driving growth?

Big news means bigger earnings for Twitter—and their Q4 2018 revenues, which beat expectations, proves that the company was able to leverage its real-time conversation appeal to bolster video ad sales during the big news events of the past year.

“Twitter’s better-than-expected performance is due in large part to increased political ad spending related to the US midterm elections and increased advertising associated with the tail-end of the FIFA World Cup Championships,” explained Monica Peart, senior director of forecasting at eMarketer.

Video accounted for more than half of Twitter’s ad revenues in 2018. And we expect this trend to continue, with video advertising growing to 60% of Twitter's total US ad revenues by 2021.

“Twitter has developed deep partnerships with premium video publishers, such as Bloomberg, NFL, ESPN, NBCUniversal and BuzzFeed and innovated high-engagement video ads to feature alongside that premium video content,” Peart said.

In its Q4 earnings report, the company cited the strength of its newer video ad formats—like Video Website Card, in-stream pre-roll and First View ads—which have kept video its fastest-growing ad format.

“Advertisers are investing in the innovative video ad products that Twitter offers which are highly engaging when appearing alongside major headline and sporting event video,” Peart said.

But user growth is not keeping pace with revenues.

Twitter is still struggling to its grow its monthly active users (MAU), which we expect will remain flat through 2022.

The company has resolved to shift away from this measurement, instead focusing on its monetizable daily active users (mDAU), or its users who log in at least once a day via an ad-supported app or browser. In a letter to shareholders, Twitter said reporting mDAU will allow the company to focus on “delivering value to people on Twitter every day and monetizing that usage.”

But changing the metric won’t make Twitter’s MAU problem go away, especially as platforms like Facebook and Instagram continue to grow exponentially faster.

“The shift in Twitter reporting from MAU to mDAU will not change our estimates as we plan to keep our platform metrics consistent for comparison purposes,” Peart said. “eMarketer's forecasting methodology makes use of survey and company data, so we do not expect to completely lose visibility to monthly active usage.”