Even though the Twitter Inc. (NYSE: TWTR) advertising story remains solid, with a second-quarter revenue beat and U.S. advertising average revenue per user (ARPU) reacceleration, growing the user base remains an important issue. As a result, Canaccord Genuity issued a report by Michael Graham, Austin Moldow and Ryan Wallace.

Twitter’s management believes it has reached early adopters and technology enthusiasts, but has not cracked the mass market yet. This will require more product innovation (and simplification) followed by a marketing campaign that focuses on how to use the service and why. One way to reinvigorate monthly active user (MAU) growth is to expand the number of visitors to the Twitter properties, relying on strong conversion to turn visitors into MAUs. One way of doing this that Canaccord Genuity believes has big potential is the integration with Google that surfaces real-time Tweets in search results. The partnership was launched in May and has since been improved. The firm updated its estimates on how this is trending.

The firm maintained a Buy rating but lowered its price target to $40 from $45, implying upside of nearly 43% from current prices.

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In August, after launching initially in May, Google Inc. (NASDAQ: GOOGL) announced that real-time tweets would be included in desktop search results as well as mobile. Additionally, English-speaking international regions would also have the tweets show up in mobile and desktop Google results.

After being available for roughly four months, the percentage of mobile search queries in the United States that surface tweets improved from 54% to 91%. The average rank in the results page and the average number of tweets per search did not change, but now almost every search across every category will display a tweet.

Although desktop only became a part of the partnership about a week ago, its penetration is ramping faster than mobile. Desktop search queries in the United States already display tweets 94% of the time. And though desktop Google results have lower click-through rates than mobile, tweets are showing up higher.

Assuming visitors to Twitter from these Google results do not overlap with MAUs, the integration could have an 8 million logged-out user impact. The biggest impact comes from the sheer number of search queries that now show tweets. With a broad international roll-out, this could go even higher.

Shares of Twitter were down 1.1% at $27.99 just after the opening bell on Friday. The stock has a consensus analyst price target of $39.58 and a 52-week trading range of 21.01$ to $55.99. The stock is down 22% year to date, versus the S&P 500 being down 5%. This is mostly the result of an 18% move down the day after second-quarter earnings when MAUs missed estimates and management reset expectations to not anticipate a reacceleration for some time.

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