Twitter’s comeback fueled by video focus and international growth

Author: Kerry Flynn.  Source: DigiDay

Twitter is no longer Wall Street’s worst enemy after the company reported its second straight (and second-ever) quarter of profitability along with double-digit revenue and daily active user growth. The platform, which celebrated its 12th birthday last month, just proved that being smaller than Facebook and Google doesn’t mean success isn’t possible. Here’s what you need to know from Twitter’s first-quarter earnings report: 

The key numbers:

• 336 million monthly active users (an increase of 6 million from the previous quarter)
• 69 million monthly active users in the U.S.
• Profit was $61 million
• 10 percent growth in daily active users from the year prior (down 2 percent from the previous quarter)
• $665 million in quarterly revenue (down 67 million from the prior quarter, but up 117 million from the previous year)
• $575 million in advertising revenue
• $347 million in U.S. revenue
• Cost per engagement was down 28 percent from the year prior
• 18 percent of its revenue came from Japan

What Wall Street wanted:
Wall Street is still getting used to the fact that Twitter isn’t a disappointment every quarter. Analysts predicted revenue of $605 million. SunTrust’s Youssef Squali estimated Twitter would add 2 million new users, Recode reported.

But the company blew past both of those estimates. Twitter pulled in $665 million in revenue. It also added 6 million monthly active users. The stock jumped up by more than 6 percent in premarket trading, but then went down to about 2 percent just before the market opened.

More people are using Twitter
Twitter’s overall usage is up. That’s in part due to improvements in surfacing relevant information in the timeline and better video. Twitter CEO Jack Dorsey said his team is working to show users interesting content based on the topics they engage with. For example, a new module at the top of users’ feeds can show a current live video from a sports team or news broadcaster a user may like.

“We are not a social network. We do not benefit from the social graph,” Dorsey said. “The more we do around interests, the more friction we remove there, the higher the benefit.”

Twitter declined to provide time spent or other engagement metrics.

Twitter also declined to share the number of advertisers on the platform. (Facebook said it has 6 million advertisers during its earnings call in November.) The number of advertisers using Twitter’s self-serve platform is growing as well as the number of people paying for a monthly subscription to promote tweets, but “off of a really small base,” according to Twitter CFO Ned Segal.

Twitter wants more video
Video now accounts for more than half of Twitter’s revenue, a trend we also saw last quarter. Video was Twitter’s fastest-growing ad format this quarter. Twitter is benefiting from increased sales on in-stream video ads, with pre-roll and mid-roll ads. Advertisers also can buy video cards that direct to a website or to download an app.

Twitter has been beefing up the number of livestreams on the network. The company inked more than 30 new partnerships. Advertisers have been finding them appealing for brand partnerships and mid-roll ads. On April 30, Twitter is hosting its second-ever NewFront to announce its latest slate of shows.

International audience is booming
Twitter may be based in San Francisco, but the company is growing all over the world. Twitter’s international revenue reached $318 million in the quarter, a 53 percent increase from the year prior. The service added 5 million more monthly active users overseas, contributing to the majority of its growth.

Twitter is particularly growing in the Asia-Pacific region. Twitter’s second-largest revenue market continues to be Japan, up 61 percent from the year prior and contributing 18 percent of Twitter’s total revenue.

Twitter reported it expects international ad revenue to exceed U.S. revenue in future quarters.

Twitter’s data business isn’t going anywhere
In the wake of the Cambridge Analytica scandal, Facebook has shrunk its data business, including instituting more restriction to its application programming interface. Meanwhile, Twitter said its data licensing business has been growing. The “other” section of Twitter’s revenue is $90 million, up 20 percent from the year prior.

As Dorsey told investors on the April 25 call, his company’s business is a bit different from Facebook CEO Mark Zuckerberg’s.

“We believe that privacy is a fundamental right,” Dorsey said. “We’re different from our peers because all of our data is public.”

Dorsey said Twitter also vets its customers thoroughly.

As to how the General Data Protection Regulation will affect Twitter, we’ll have to wait and see:

Twitter as a news app helped usage numbers
While Facebook pushes media partners aside (except within Watch), Twitter attracts more engagement with news on the platform. The executives on the call declined to comment if it was a direct cause, but said the company’s earlier decision to focus Twitter as a news app has helped bolster app use.

“People naturally see Twitter as a place to figure out what’s going on,” Dorsey said. “We believe it’s our core job to keep people informed.”

Other news apps like Flipboard, however, compete with that: