By Adam Fraser
Twitter has delivered it’s Q3 2017 results and its another set of patchy results.
User growth was moderately encouraging, adding 4m users after adjusting for a prior quarter calculation error of 2m users (the company admitted it has misstated user numbers since the end of 2014 – never a good look). However, the company again posted a loss, and the dramatic growth evident at Facebook and Instagram, quarter after quarter, remains elusive for Twitter – even in a world where the US President is very publicly using the platform regularly. Revenue actually declined by 4% compared to the same quarter a year ago.
Having baked in a lot of bad news, the share price actually rallied on the results announcement, based on expectations of profitability in the coming quarters.
If you want to dive into all of the detail, you can check the financials, investor presentation, shareholder letter and investor conference call. If you want the key highlights here are the 10 key takeaways:
- Monthly active user (MAU) numbers were 330m, from 326m last quarter (1.2% growth) and 317m a year ago (4.1% growth).
- 21% of Twitter’s MAUs (69m) are based in the USA; this is an increase from 68m in the prior quarter, noting most of the user growth is coming internationally (261m v 258m in the prior quarter).
- Attempts to drive greater engagement and more regular usage of the platform are working, with Daily Active Users growing at 14% on prior year v 12% last quarter and 7% a year ago (interestingly the company does not reveal the absolute number of DAUs and actively refused again to release this in the face of formal queries).
- Ad metrics were encouraging: cost per engagement declined by 54% and overall ad engagements increased by 99% on a year-over-year basis. CTRs on a year-over-year basis are up across all major ad types.
- Historically, a significant Achilles heel for Twitter has been trolls and abuse on the platform. The company noted they had further refined their machine-learning algorithms in order to better identify and act on accounts demonstrating abusive behaviours. The company also noted, “we’ll be taking a more aggressive stance on our abuse rules and on how we enforce them”.
- Revenue at $590m was up 3.0% on the prior quarter of US$573m and, more significantly, 4.2% lower than a year ago when ad revenue was $545m. The revenue trends are clearly not convincing.
- The breakdown of revenue for the quarter showed 85% of revenue coming from advertising and 15% (consistent with the prior quarter) coming from data licensing/other (the ‘big data’ aspect still offers great potential for Twitter).
- Twitter made a loss of US$21m for the quarter (its smallest ever reported quarterly loss) but also discloses “adjusted EBITDA which showed a profit of US$207m after adjusting for stock-based compensation, depreciation and amortisation Twitter ended the quarter with US$4.3bn in cash so despite the frequent “Twitter is dying” headlines, the business is solidly funded.
- Live video remains a key focus. In Q3 Twitter announced approximately 30 live-streaming partnerships, including 10 international deals and two with leading consumer brands (Converse and Tommy Hilfiger). In Q3, Twitter streamed more than 830 events.
- Twitter streamed 96 million hours of live user-generated content via Periscope in the quarter.
Jack Dorsey, Twitter’s CEO said, “This quarter we made progress in three key areas of our business; we grew our audience and engagement, made progress on a return to revenue growth, and achieved record profitability”.
Jack has certainly had a positive impact since returning as CEO, delivering a tighter strategy and a more communicative approach to market updates. The absence of strong monthly user growth remains a key negative (especially in the context of the massive earned media from the US President), whilst continuing quarterly losses are always a concern. Twitter has undoubted public utility and societal importance – whether this means it can remain long term as a viable, independent listed company is a more difficult question.
By Adam Fraser
Snapchat continues to experience a bumpy ride as a listed company.
As I previously wrote, it disappointed the market with its first quarterly results as a listed company. This pattern continued as it delivered its second set of quarterly numbers – the already troubled share price fell a further 17% and now sits well below the initial IPO price.
If you want to dive into the details, you can check the detailed financials, investor presentation and press release around the quarterly numbers. If you want a quick summary, the 10 key takeaways from the Q2 2017 results are below:
- Daily Active Users (DAUs) grew to 173m from 166m in the prior quarter (4% growth) and 143m a year ago (21% growth).
- Average revenue per user was US$1.05 compared to $0.90 in the last quarter and $0.50 a year ago – this is well below the levels achieved by Facebook.
- Revenue for the quarter was US$182m compared to $150m last quarter and $72m a year ago.
- The user and revenue growth was under the level expected by the market, leading to the negative response in the share price.
- Net loss was $443m for the quarter, compared to a massive US$2.2bn in the prior quarter – note this figure was inflated by the expense associated with stock issues related to the IPO.
- Instagram stories reported in the latest Facebook announcement, that it had 250m users, showing the extent to which Instagram is successfully taking Snapchat head on via imitation of its key features.
- USA DAUs were 75m, representing 43% of global users, a ratio that has been broadly consistent for the past 12 months
- The USA, however, drove 81% of global revenues, showing the more rapid advertiser adoption in the company’s home location compared to the rest of the globe.
- Capital expenditure for the quarter was $19m, broadly consistent with the past 12m when the quarterly amount has varied between $16m and $20m.
- Adjusted EBITDA (removing the impact of stock based compensation) was a loss of US$194m for the quarter, the highest quarterly loss in the period reported (which went back to Q2 2016).
Snapchat is learning what Twitter has learned over recent years – analysts will focus obsessively on short term user growth almost to the exclusion of every other metric, making long term strategic planning a challenge to execute in a listed company environment.
Still valued at US$15bn whilst significantly loss making, Snap Inc is learning that when investors price perfection, even small disappointments will lead to the harshest of share price responses.
Snapchat is growing its user and revenue base. But its losses are also growing. And the glare of the public markets can be an uncomfortable environment to innovate, evolve and pivot whilst also attempting to drive profitability.
Snapchat has by no means completely lost its luster and its loyal, engaged millennial audience remains highly attractive to marketers. However competition from Facebook and Instagram is fierce, and much of its IP has been easily imitated. The road ahead does not look to be an easy one as Snapchat attempts to justify what remains a massive valuation relative to its actual financial performance.
By Adam Fraser
Twitter has delivered its Q2 2017 results, and the green shoots of hope evident last quarter seem to have disappeared pretty quickly.
Whilst the financial results have always been weak, most significantly, monthly user numbers plateaued after increasing by an encouraging 9m users in the prior quarter. The market didn’t like what it saw, however, with the share price declining by around 13% on release of the results.
If you want to dive into all of the detail, you can check the financials, investor presentation, shareholder letter and investor conference call. If you want the key highlights here are 10 key takeaways:
- Monthly active user (MAU) numbers were stable at 328m in line with the last quarter and 313m a year ago (5.3% growth); this is the biggest concern for analysts. Despite the President of the USA using Twitter as his primary means of communication,
- 21% of Twitter’s MAUs (68m) are based in the USA; this is an increase from 67m in the prior quarter, noting most of the user growth is coming internationally
- Attempts to drive greater engagement and more regular usage on the platform are working, with Daily Active Users growing at 12% on prior year v 14% last quarter and 7% in Q3 (interestingly the company does not reveal the absolute number of DAUs and actively refused again to release this in the face of formal queries).
- Total ad engagements increased 95% year-over-year, driven by a continuing mix shift toward video ad impressions as well as higher click-through rates, as a result of better targeting and ad relevance
- Historically, a significant Achilles heel for Twitter has been trolls and abuse on the platform. The company noted it had continued to make meaningful progress in this area. now taking action on 10X the number of abusive accounts every day compared to the same time last year. This very important.
- Revenue at $573m was up 4.6% from the prior quarter of US$548m and, more significantly, 4.8% lower than a year ago when ad revenue was $602m. The revenue trends are not convincing
- The breakdown of revenue for the quarter showed 85% of revenue coming from advertising and 15% (versus 14% in the prior quarter) coming from data licensing/other (the ‘big data’ aspect has huge potential for Twitter).
- Twitter made a loss of US116m for the quarter but also discloses “adjusted EBITDA which showed a profit of US$178m after adjusting for stock based compensation, depreciation and amortisation Twitter ended the quarter with US$4.1bn in cash so despite the regular “Twitter is dying” headlines we see, the business is solidly funded.
- Live video remains a key focus. In Q2 Twitter announced approximately 40 live-streaming partnerships, including two 24×7 networks and 10 international deals, extending their total live streaming content deals to well over 200 premium content partners across Live video and Amplify
- Video remained Twitter’s largest and fastest-growing ad format in Q2, reflecting strength in their First View ad format and in pre roll and mid-roll In-Stream Video Ads. Twitter also made a very strong debut at the 2017 Digital Content NewFronts
Jack Dorsey, Twitter’s CEO said “We’re strengthening our execution, which gives us confidence that our product improvements will continue to contribute to meaningful increases in daily active usage. We’re also encouraged by the progress we’re making executing against our top revenue generating priorities as we focus on making Twitter the best place to see and share what’s happening, where you can see every side and perspective.”
Jack has had a positive impact since returning as CEO, delivering a tighter strategy and a more communicative approach to market updates. The absence of monthly user growth is the key negative (especially in the context of the massive earned media from the US President’s ongoing use), whilst of course large, continuing quarterly losses. Whether Twitter can convert its undoubted public utility and societal importance into a viable profitable business still remains to be seen.