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Analyst Blog

Recently, Twitter (TWTR - Analyst Report) inked a deal with Omnicom Media Group (OMC - Analyst Report) valued at approximately $230.0 million. The deal will allow Omnicom to integrate its programmatic agency Accuen into mobile ad exchange MoPub, which Twitter acquired in Sep 2013.

MoPub is an ad exchange that allows advertisers to buy mobile ads in real time. The Omnicom deal is expected to boost Twitter’s status as an advertising platform that will attract new advertisers.

This is not the first time that Twitter has partnered with a media company. In 2013, it had formed partnership with Publicis’ Starcom Mediavest Group and WPP.

Per Gartner, mobile advertising spending is forecast to reach $18.0 billion in 2014, while the market is expected to grow to $41.9 billion by 2017. This presents a significant growth opportunity for Twitter.

Per eMarketer, Twitter is seeing strong user growth in the Asia-Pacific, helping the messaging platform compensate for a slowdown in the US and Europe. eMarketer forecasts Twitter's global user base will increase 24.4 per cent in 2014, led by big gains in countries like Indonesia and India.

We believe that new products and services will be major growth drivers going forward. Moreover, as spending on online advertising is expected to increase manifold compared to traditional media, we believe that Twitter has massive growth opportunity owing to its strong mobile products. International expansion and accretive acquisitions are other significant positives.

Twitter’s ability to attract advertising revenues, despite significant competition from Facebook (FB - Analyst Report), Weibo and market leader, Google (GOOGL - Analyst Report), will be a key factor determining its growth. However, higher operating costs are expected to hurt profitability in the near term.

 Currently, Twitter has a Zacks Rank #3 (Hold).

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