AppLovin (NASDAQ: APP), the mobile ecosystem expert, has finalized a deal to acquire MoPub from Twitter (NASDAQ: TWTR) in a $1.05 billion all-cash deal, adding immediate liquidity to draw upon for the social media giant. The ad space has become increasingly challenging, so it’s no surprise Twitter is releasing this mobile-based segment to a company better equipped to navigate a volatile market.
Was the MoPub sale good for Twitter?
Apple’s 14.5 privacy update last year has caused negative impacts for advertising businesses across the board, but especially those based around mobile applications. So, it’s evident that maintaining and growing this segment could have been costly and risky to Twitter. With additional updates coming from Apple — such as the restricted use of data and information reporting requirements — it looks like Twitter may have just dodged a bullet.
MoPub was just one segment of the Twitter model, but the company is setting more ambitious strategic targets by focusing on the creator economy and integration of cryptocurrency as it grows out new revenue streams and disparages from its overreliance on advertising revenue.
What does it mean for Twitter’s future?
Advertising is a core part of Twitter’s business — it’s a social network after all. But the firm is moving towards a reimagined model that could spark better compensation for the company, users, and investors alike. Twitter has set ambitious targets in the near term, striving to almost double total revenue by 2023 to $7.5 billion and vastly increase the number of monetizable daily active users on its platform.
The proceeds of the agreement will likely be reinvested into Twitter’s strategy to create new features that can attract and retain new users. Building out the tools needed to create monetizable revenue streams for customers is where the focus is right now.
What does it mean for investors?
It was reiterated by management in Twitter’s Q3 2021 earnings that this sale will not affect the company’s strategy and goals. The sale may cause some short-term headwinds in relation to cash flow, estimated to be in the region of $200 million to $250 million.
The struggle with Twitter is not the platform itself, but its path to monetization. It’s got a long way to go in creator circles, but with 37% revenue growth in Q3 2021, the company is at least taking the appropriate steps to get there.
While it’s positioned uniquely, given Twitter’s older audience typically with more spending power — 63% of users are between 35 and 65 — it will be interesting to find out how the company differentiates itself compared to competitors largely populated with Gen Z and Millennial users. However, we will still need to see more from Twitter before it can be viewed as a viable rival to the likes of Instagram, TikTok, and YouTubes of the world in relation to the influencer ecosystem.
Financial Writer at MyWallSt
David's favorite stock is Google. He's a daily user of its YouTube platform, where you can learn or find something brand new at the touch of a button. He believes the company will continue to grow for many years to come.