National Post (National Edition)

Twitter jumps most in a year after sales top estimates

Ad business improves but gaining new users slows down


Twitter Inc. jumped the most in a year after it reported fourth-quarter revenue that topped analysts' estimates, capitalizi­ng on a robust holiday season for digital advertisin­g.

Revenue rose 28 per cent to US$1.29 billion, compared with the US$1.19 billion average analyst prediction, according to data compiled by Bloomberg. Twitter on Tuesday cited “strong brand advertiser demand in the U.S.” as a driver of ad sales in the fourth quarter, according to the company's shareholde­r letter. Net income rose to US$222 million, or 27 cents a share.

The shares soared as much as 16 per cent on Wednesday, the most since Feb. 6, 2020, hitting a seven-year high. They were trading at about US$65 at mid-afternoon in New York, up 8.6 per cent, and closed at US$67.77 for a 13.16-per-cent gain. Several analysts raised their price targets on the stock.

At the same time, the social network added fewer new users than projected and warned that audience gains in 2021 will slow compared with last year's pandemic-fuelled surge.

Twitter reported 192 million daily active users, 26-per-cent growth from a year earlier but shy of estimates for 193.4 million. Overall for 2020 the company added 40 million new daily users, crediting the gains to both “product improvemen­ts” and a series of major events that drew in audiences, including the U.S. presidenti­al election and discussion around the COVID-19 pandemic.

It was a strong quarter for digital advertisin­g companies in general, which were buoyed by the push toward online shopping during the pandemic. Facebook Inc., Alphabet Inc.'s Google, Snap Inc. and Pinterest Inc. all reported better-than-expected revenue for the period. Still, Twitter's lacklustre user additions could reignite concerns about longterm growth, especially after the company permanentl­y banned former U.S. president Donald Trump from the service in January after his comments were seen as encouragin­g a mob at the U.S. Capitol.

Twitter has long argued that Trump's presence on the platform didn't meaningful­ly impact user growth, but it did raise Twitter's public profile during his four years in office.

“We are a platform that is obviously much larger than any one topic or any one account,” CEO Jack Dorsey told analysts on Tuesday. He added that the majority of Twitter's users are outside the U.S., and that the service has more than 50 accounts with over 25 million followers. He also pointed out that daily active users will likely grow more than 20 per cent in the first quarter, which is when Trump was banned.

In the recent period, Twitter added 1 million new users in the U.S., and now has 37 million average daily users in its most profitable market.

User growth, which has come in above 20 per cent for the past five quarters, will slip to a percentage in the “low double digits” starting in the second quarter, Twitter said in a statement. “Looking beyond Q1, the significan­t pandemic-related surge we saw last year continues to create challengin­g comps,” the company wrote in its letter to shareholde­rs.

Twitter projected first-quarter revenue of US$940 million to US$1.04 billion. Analysts estimated Twitter's first-quarter revenue would be US$983.4 million.

The San Francisco-based company said it expects a “modest” impact to its advertisin­g business from Apple Inc.'s upcoming changes to the iOS 14 mobile operating system, which could make it harder for companies to track and then re-target users with ads. Rival Facebook has said the changes could pose a serious threat to its business, but Twitter is less dependent on targeted ads, and relies more on brand advertisin­g, which typically includes more general messaging and targeting.

The company highlighte­d revenue from ads that promote mobile app installs, called MAP ads, which Twitter worked to improve in the past year. MAP ads generated more than US$300 million in revenue in 2020, which was unchanged from a year earlier, though Twitter said sales from MAP ads improved by more than 50 per cent in the fourth quarter.

Twitter has been exploring subscripti­on services to add revenue streams other than advertisin­g. Multiple internal teams are researchin­g subscripti­on products, though Twitter executives have said that such initiative­s are still a long way off.

The company didn't mention subscripti­ons in its shareholde­r letter on Tuesday, and chief financial officer Ned Segal said there was “nothing new to report” when asked about subscripti­ons on the call.

 ?? DADO RUVIC / REUTERS FILES ?? Twitter's lacklustre user additions could reignite concerns about long-term growth,
especially after it banned former U.S. president Donald Trump from the service.
DADO RUVIC / REUTERS FILES Twitter's lacklustre user additions could reignite concerns about long-term growth, especially after it banned former U.S. president Donald Trump from the service.

Newspapers in English

Newspapers from Canada