By Adam Fraser
Twitter has delivered its Q1 2017 results, and there are green shoots of hope for the first time in some time.
Whilst the financial results remain weak, most significantly user numbers shifted upwards by 9m users for quarter, faster growth than Twitter has seen for some time. The market liked what it saw, pushing the shares 10% higher as a result.
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 grew to 328m from v 319m last quarter (up 3.1%) and 310m a year ago (6.1% growth); this is the fastest total quarterly user growth Twitter has delivered since Q4 2015.
- 21% of Twitter’s MAUs (70m) 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 (constant tweaks to the algorithm which determines what you see in the timeline may not be popular but they seem to be effective), with Daily Active Users growing at 14% on prior year v 11% last quarter and 7% in Q3 (interestingly the company does not reveal the absolute number of DAUs).
- Total ad engagements increased 139% year-over-year, driven by a continuing mix shift toward video ad impressions and higher video view rates from product improvements such as video quality optimization and latency improvement.
- Historically, a significant Achilles heel for Twitter has been trolls and abuse on the platform. The company noted it had made meaningful progress toward identifying and removing accounts that demonstrate abusive behavior and, as a result, Twitter is seeing less abuse reported across the service. Important.
- Revenue at $554m was 22% down on the prior quarter of US$717m and, more significantly, 7% lower than a year ago when ad revenue was $595m. Notwithstanding the better user numbers, this absolute decline in revenue is a real concern.
- The breakdown of revenue for the quarter showed 86% of revenue coming from advertising and 14% (versus 11% in the prior quarter) coming from data licensing/other (the ‘big data’ aspect has huge potential for Twitter).
- Twitter made a loss of US62m for the quarter but also discloses “adjusted EBITDA which showed a profit of US$170m after adjusting for stock based compensation, depreciation and amortisation Twitter ended the quarter with US$3.9bn in cash so despite the regular “Twitter is dying” headlines we see, the business is solidly funded.
- In Q1 Twitter streamed more than 800 hours of live premium video from content partners across more than 450 events reaching 45 million unique viewers, an increase of 31% from Q4’16 (the first full quarter of live streaming premium content). Of these hours, 51% were sports, 35% were news and politics, and 14% were entertainment. Twitter is making a big bet on live streaming.
- Notwithstanding the encouraging user growth, Twitter informed the market it expects advertising revenue growth to continue to meaningfully lag that of audience growth in 2017, including in Q2.
“We’re proud to report accelerating growth in daily active usage for the fourth consecutive quarter, up 14% year-over-year,” said Jack Dorsey, Twitter’s CEO. “We’re delivering on our goal to build a service that people love to use, every day, and we’re encouraged by the audience growth momentum we saw in the first quarter. While we continue to face revenue headwinds, we believe that executing on our plan and growing our audience should result in positive revenue growth over the long term.”
There is no question that Jack has had a positive impact since returning as CEO, delivering a tighter strategy and a more communicative approach to market updates. User growth is undoubtedly encouraging, but there is no denying the importance of large, continuing quarterly losses. Whether Twitter can convert its undoubted public utility and societal importance into a viable profitable business remains to be seen.