Twitter Inc announced a tie-up with payments processing start-up Stripe Inc. that will let the micro-blogging site’s users purchase goods through a 140-character tweet. The partnership was announced earlier in the week. And is expected to increase user engagement and help the site expand its base.
Twitter’s move to let users shop via tweets should help boost profit at a time when the site is struggling to grow its audience. The social network topped earnings and revenue estimate in the second quarter. But sluggish user growth continued to disappoint investors. On top of that is the ongoing management turmoil that has seen the stock plunge over the past year.
Co-founder Jack Dorsey has been at the helm on an interim basis since Dick Costolo left. The firm’s board of directors met last week but could not end the prolonged search for a CEO. Wall Street favors Dorsey for the job. Another internal candidate is revenue chief, Adam Bain.
User growth slowdown could reverse
Despite a string of new products, Twitter Inc announced in July that monthly user growth was at its slowest since it became public in 2013. The site currently has just over 300 million users who log in at least once every month. However, all that could change if the foray into shopping overcomes the initial hiccups.
“Being a conduit for a financial transaction is a very sweet position for a platform, but there are a lot of fundamental challenges that the company has to overcome,” according to Gartner.
CFO Anthony Noto does not expect sustained growth until the site opens up to the mass market and payment partners. Most analysts think Twitter’s latest move should deliver high margin growth and increase engagement with the existing user base.
Twitter Inc newest Revenue Stream
Twitter Inc will open up new revenue streams by facilitating transactions. If users buy goods directly, Twitter will stand to gain between 8 to 10 percent of the item purchase price. This has the potential to give a big boost to bottom line when compared to traditional advertising models. The revenue earned through direct transactions will be much higher than what Twitter would have made by directing traffic to merchant sites.
Also, Twitter’s decision is likely to attract a large number of retail partners. Purchasing goods would become easier and faster for consumers through Twitter. Retailers know that converting an ad into a sale is relatively much tougher. Customers have to first visit a new site, which gives them time to research and ponder over their decision. Twitter Inc ’s direct buying option will allow retailers to capitalize on impulse shopping – a strong driver of sales.