The primary mandate for Twitter Inc’s proposed R&D centre in Bangalore would be to tailor a solution to the social networking site’s continuing struggle in monetising its products and services in India due to the peculiarities of its user base here, with a majority of those accessing the website via feature phones with limited functionality.
This is in contrast with the trend globally of consumers accessing the site using smartphones, desktop applications or over the Twitter website. The user interface trend in India has been flagged by the San Francisco-based company as a big limiting factor in its ability to cash in on the website’s potential and thereby restricting the ability of its advertisers to deliver “compelling advertisements”.
Twitter did not offer a comment on the scale of operations of the proposed Indian R&D centre or the investment details. According to an executive in the know, the main task on hand for the developers is to tackle this problem of reduced ad engagements on account of the peculiarity in user behaviour in countries such as India and, to some extent, Indonesia, something that has been cited as a factor adversely affecting Twitter’s “business and operating results”. Especially as
India is set to become Twitter’s largest market after the US with a projected 40 million users by 2018, up from 17 million now, according to eMarketer data.
Apart from India, Indonesia is the other fastest growing market for Twitter. The proposed Bangalore R&D unit, Twitter’s first such facility outside the US, comes in the wake of Twitter’s acquisition last month of Bangalore-based mobile start-up firm ZipDial for about $40m and the possible deployment of ZipDial’s team in product delivery plans.
Efforts by the company to monetise its operations in geographies such as India also comes from a growing imbalance in Twitter’s revenue generation trends across its key markets, especially when it comes to its need to increase revenue from the activity generated by its international users in order to grow its business. For instance, while users outside the United States constituted 78 per cent of Twitter’s average MAUs (monthly average users) in the three months ended December 31, 2013, the company’s international revenue, as determined based on the billing location of its advertisers, was just 27 per cent of its consolidated revenue during the three months.
In its latest annual report, the company has specifically cited its “inability to successfully expand internationally” as something that “could adversely affect our business, financial condition and results”.
Given the company’s thrust in the Indian market, Twitter, in an SEC filing in the US in end-2013, specifically highlighted the fact that if its revenues from international operations, and particularly from operations in the countries and regions on which the company had focused its spending, failed to exceed the expense of establishing and maintaining these operations, “then the company’s business and results will suffer”.
There are other markets where differences in the competitive landscape has impacted Twitter’s ability to monetise its products and services. In South Korea, the company faced intense competition from a messaging service offered by Kakao, which offered some of the same communication features as Twitter.