Is Twitter buying Tik Tok

Investors Ignore Twitter’s Low User Growth As Ad Sales Surge In Earnings

Twitter posted strong earnings yesterday as its advertisement business rebounds after the pandemic-fueled slump.

On Tuesday, Twitter (NYSE: TWTR) posted quarterly earnings that beat Wall Street estimates. The social media company’s solid beat was influenced by ad product improvements which luckily encouraged shareholders to look past Twitter’s bleak forecast for user growth. The microblogging site said it expects user numbers to slow down to low double-digits this year as the boost from the pandemic dies out. 

Twitter’s Q4 earnings

Here are some key figures from Twitter’s fourth-quarter earnings report: 

  • Total revenue: $1.29 billion, up 28% year-over-year (YoY). 
  • Adjusted earnings per share: $0.38 versus $0.31 forecasted. 
  • Average monetizable daily active users: 192 million, up 26% from a year earlier. The Street was expecting 196.5 million. 
  • Ad revenue: $1.15 billion, up 31% from the same period a year ago.
  • Expenses for 2021: will increase 25% for the year but also said that revenue would outpace costs.  

Twitter said that user growth had increased due to global topics being discussed on the app, including the U.S. election and COVID-19. However, changes made to combat misinformation during the election caused a dip during the quarter. Investors looked past this though as ad revenue and total profitability were all higher than estimated. 

The app that famously booted former-President Donald Trump has been the subject of global debates lately over concerns about free speech. Twitter was also in the spotlight after it refused to comply with the Indian government’s instruction to block accounts linked to the farmers’ protests. During the earnings call, CEO Jack Dorsey tried to soften the impacts of the account closures in January after the Capitol riot, stating: 

“We are a platform that is obviously much larger than any one topic or any one account. 80% of our audience is outside the United States.” 

The social blogging site is in the midst of building tools to help advertisers increase product sales and target ads to interested users, which other social media companies have been doing for years. This should help the company earn even more money from advertisers. 

Furthermore, the company is also trying to tackle misinformation spreading on the app by testing out a Birdwatch feature. This addition allows a select group of people to add context in the comments of tweets that have been flagged as potentially false or harmful, similar to Reddit’s moderation style. The work that Twitter is doing should help improve the reputation of the site which might encourage more advertisers to use the platform. 

Twitter’s subscription services

However, investors were disappointed to not hear more details about the company’s subscription plans following its acquisition of Revue in January. If you’re on Twitter, you will likely have heard the famous line “I can’t believe this app is free.” Well, parts of it might not be for much longer. Twitter snapped up newsletter tool company Revue to explore the addition of subscription services to supplement its advertising revenues. However, Dorsey warned investors that the company did not expect to see substantial revenue from subscription services until 2022. 

Twitter also released a test of “Spaces” in the fourth quarter, an audio-chat room feature similar to the voice-based app Clubhouse.

How did Twitter perform in Q4?

Twitter managed to rack up its second billion-dollar quarter which sent shares up 3% in extended trading. The California-based company is also making significant moves to help improve its ad business and add features to safeguard its followers from false information at the same time. 

The newsletter subscription service is a unique revenue source for the company to explore that has not been touched on yet by some of its competitors. As the platform continues to be used as a center place for individuals and businesses to discuss politics, the stock market, and pop culture — any way Twitter can gain more income from the useful information that’s shared on the app is a great move.

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