Twitter’s push into live video and more personalised content is finally starting to pay off, boosting revenue and profit more than projected in the first quarter by luring users and advertisers. The shares rose.
Sales jumped 21%, the most in two years, to US$664.9m, Twitter said on Wednesday in a statement. That surpassed the average analysts’ estimate of $605.9m, according to data compiled by Bloomberg. The social media network, originally known for its 140-character posts, said monthly active users rose to 336m, up by six million from the prior period and slightly ahead of analysts’ predictions.
The numbers validate a growing view among analysts that the company has stabilised after a rocky few years, when it struggled to compete for ad dollars with the likes of Facebook and Google’s YouTube. Since Twitter reported a third-quarter earnings beat in October, its shares have rallied more than 50% and been upgraded by at least eight analysts. The strong revenue and user growth also indicates that escalating concerns about social media companies’ data collection practices so far haven’t eroded Twitter’s business.
“There’s just been a continued global interest in news and information that’s a good tailwind for Twitter, especially as their products improve,” said Richard Greenfield, an analyst at BTIG, before the results. “They’re iterating the product more in the last two years than they have in the past seven.”
The stock jumped 14% before giving up some of those gains in early trading. The shares were up 4% to $31.76 at 7.33am premarket in New York.
CEO Jack Dorsey, who also runs Square, has focused on making Twitter more useful, including streaming programming such as National Football League highlights and recaps of series like Game of Thrones. The company is applying artificial intelligence to put the most relevant tweets at the top of people’s feeds, and has added features that curate tweets, photos and videos around events. Twitter said daily active users increased 10% in the recent period, marking the sixth consecutive quarter of double-digit increases. The company doesn’t give a total number for DAUs.
More of Twitter’s growth is coming from international markets as the US gets saturated. Monthly active users in the US increased by a million from the fourth quarter to 69m. Internationally, monthly active users grew to 267m users from 262m. Revenue in the US increased 2% year on year, while international revenue jumped 53%.
‘What’s happening now’
Dorsey has been honing the platform into a place to see “what’s happening now”, and positioning the site as the place to find out about live events from news to concerts.
Awareness of Twitter’s brand has also received a boost from frequent tweets by public figures like US President Donald Trump, who is among the platform’s most high-profile users. Global events like the Olympic Games and government elections also help to drive user growth.
And as Twitter has worked to root out terrorist content and abusive trolls, advertisers’ perceptions of the platform are also improving, according to a survey conducted by RBC Capital Markets and Ad Age.
“Twitter’s video ad product continues to perform well as advertisers continue to look for higher quality online video impressions,” wrote Morgan Stanley analyst Brian Nowak, a long-time Twitter bear who upgraded the stock to equal-weight last week, citing improved personalisation that’s keeping users on Twitter for longer.
Marking its second quarter of profit under generally accepted accounting principles, Twitter posted net income of $61m, or $0.08/share, in the first quarter. That compared with analyst projections for a net loss of $0.02 on average. Profit excluding some costs was $0.16/share, exceeding estimates for $0.12.
The company gave a second-quarter outlook for adjusted earnings before interest, taxes, depreciation and amortisation of $245m to $265m. Analysts estimated $218m.
While Twitter seems to have found a path for growth, Dorsey is being pressed to follow in the footsteps of Facebook CEO Mark Zuckerberg and testify before the US congress about data privacy. Twitter, Facebook and Google are all facing calls for potential regulation on Internet companies following revelations that political consulting firm Cambridge Analytica harvested private data from some 87m Facebook users. Twitter itself was found to be overrun by Russian bots during the 2016 US election cycle.
Twitter continues to address criticism that it hasn’t done enough to combat the spread of misinformation, harassment and manipulation from automated posts. Last month, Dorsey asked the public to propose solutions to make the social network a nicer place by measuring “collective health, openness and civility of public conversation”. Twitter is working on a “transparency centre” to show how much political campaigns spend on advertising, and the company endorsed the Honest Ads Act, a US senate bill that would subject online political ads to the same sort of disclosure rules that govern similar content on TV and radio.
Twitter said it’s limited the ability of users to perform coordinated actions across multiple accounts, which has resulted in roughly 90% fewer users creating fake or automated engagement through the social media dashboard TweetDeck. In the first quarter, the company said it removed more than 142 000 applications connected to Twitter that violated developer rules and were collectively responsible for more than 130m “low-quality” tweets during the same period. — Reported by Selina Wang, (c) 2018 Bloomberg LP
