By Adam Fraser
Twitter has released its Q1 2016 results to the stock market.
At a high level the company disappointed the market by missing its revenue target, despite delivering $595m in the quarter and 36% growth on the prior year, and the stock feel by 14%. But digging under the headlines it wasn’t all doom and gloom.
If you want to dive into all of the detail, you can check the financials, investor presentation (also broadcast via Periscope!) and investor conference call. If you want the key highlights here are 10 key takeaways:
- Monthly active user (MAU) numbers grew slightly to 310m from v 306m last quarter (up 1.3%) and 301m a year ago (3.0% growth); a return to growth is encouraging but the pace is insignificant compared to other social networks
- 21% of Twitter’s MAUs (65m) are based in the USA; user numbers in the USA are flat with growth coming internationally
- Mobile MAUs were 83% of users, indicating Twitter sits in between Facebook ( 90%+ mobile users) and LinkedIn (approx 60% mobile users) for mobile penetration
- Revenue at $595m was 16% down on the prior quarter of US$710m but 36% higher than $436m a year ago; the market was expecting higher
- The breakdown of revenue for the quarter was broadly consistent with recent periods, with just under 90% of revenue coming from advertising and circa 10% coming from data licensing/other (the ‘big data’ aspect has huge potential for Twitter). Video ads are certainly growing but generally cannibalising marketing budget from other types of Twitter ads
- Total ad engagements grew 208% year-over-year, an acceleration in growth compared to Q4 2015, driven once again by the adoption of auto-play video, increases in ad load versus the prior year period, and improvements in click through rate in select ad formats
- Twitter made a loss of US$80m for the quarter but also discloses “adjusted EBITDA” which showed a profit of US$180m after adjusting for stock based compensation, depreciation and amortisation. Twitter ended the year with US$3.6bn in cash.
- Growth in Periscope is important and encouraging: people have created over 200 million broadcasts to date, and watch over 110 years of live video every day on iOS and Android; a streaming deal for live NFL games next year is an exciting development re live video use on Twitter
- The new algorithmic timeline (despite the widespread debate before it was launched) has proved effective with engagement (tweets, retweets, likes etc) up and the opt out rate (to the pure reverse chronological timeline) only 2%
- A key line in the results release highlighted the continued strategic focus on live: “We’re focused now on what Twitter does best: live. Twitter is live. Live commentary, live connections, live conversations”. Agree on this 100% as I have previously written.
At the end of Q4 2015, Twitter adapted the way it presents information to the market via the introduction of an investor letter to provide context to the results. It may seem a minor point but for a business that has been so widely misunderstood in the past, it has been an important change. The market may or may not like the results but it at least should have a clear understanding of the overall strategy. We were reminded that the top 5 priorities for 2016 are refining the core service, live streaming video, creators and influencers, safety and developers.
The increased focus on business use for customer service is encouraging with 2 new products launched in the quarter – an easier way to take a public conversation to DM and customer feedback cards to understand customer satisfaction. With Facebook also making great strides in this area (in particular via messenger) it is important Twitter doesn’t lose its initial completive advantage here (I have previously discussed in the podcast how effective Twitter can be for customer service). Unique DM volumes were up 50% on the prior year.
Short term revenue and user numbers remain broadly disappointing but product developments and the sharper strategic focus are encouraging. Jack is back and has started to bring in a new exec team. The remainder of 2016 will be critical in determining whether Twitter can remain a viable independent listed company or will be acquired.