That moment when you realize Wall Street will never give you a break, even if you beat on revenue and report profits. #MAUproblems.
Twitter’s stock tanked more than 16% in pre-market trading Friday morning based on lackluster user growth in Q2, despite reporting a 24% overall revenue uptick and a third sequential quarter of profitability.
Although global monthly active users (MAUs) grew by 9 million year over year to 335 million, Twitter shed roughly 3 million MAUs, due primarily to its cleanup efforts – kicking millions of crappy accounts to the curb – and phasing out contracts with paid SMS carriers in certain markets.
The General Data Protection Regulation (GDPR) rollout in Europe also contributed to the attrition, but to a lesser extent, said Twitter CFO Ned Segal.
Facebook also took a GDPR-related lump during its second-quarter earnings on Wednesday, with MAUs dipping in Europe by around 1 million.
But in Twitter’s case, North America MAUs stagnated at 68 million year over year and actually decreased by 1 million on a quarterly basis.
Twitter claims, however, that many of the millions of fake and/or dormant accounts it’s constantly removing from the platform never get included in the MAU count, either because they’ve been inactive for 30 days or more or because Twitter is starting to get better at catching them during the sign-up process.
It’s likely, however, that Twitter’s efforts to clean up will take more of a toll on user counts in the third and fourth quarters. Twitter ramped its efforts in July.
A bright spot in Q2 was daily active users, which increased by 11% YoY, although it’s hard to know exactly what that means, since Twitter doesn’t provide a material DAU baseline.
Yet, Twitter is safely in the black. Overall revenue hit $711 million, beating analysts’ estimates by more than $13.5 million, and the company is profitable. Ad revenue was up 23% to more than $601 million, and ad engagement for the year was up 81% while the cost per engagement decreased 32%.
Twitter’s initiatives to curb abuse and boot fake accounts isn’t affecting revenue noticeably, according to Segal, because advertisers “recognize that a healthier Twitter as opposed to a disclosed metric is what’s going to deliver a great result for them on the platform.”
“In fact, the impact on revenue ends up being pretty constructive, because advertisers embrace the work that we’re doing,” Segal said. “They talk about it when we meet with them and they vote with their dollars.”
The big question is whether Twitter can continue to meaningfully grow revenue if it’s not growing its user base at the same time. According to Segal, growing revenue more than audience is possible, at least in the short term. The Q2 results are proof of that.
Continued investment in its ad platform drives revenue, including machine learning, self-serve options and new ad formats like DR video website cards, as well as contributions from MoPub, he said.
In the long term, though, purging the platform of junk is an investment in the future over “near-term metrics.”
“Our mission is to deliver a great experience on Twitter to as many people in the world as we can, and we still have a lot of work to do there,” Segal said. “We recognize that is going to be the life’s blood of growth for the business over a longer period of time.”
This post was syndicated from Ad Exchanger.
More Stories
The Best Holiday Ads of 2024
The Year in Ratings: How the Major News Outlets Performed in 2024
Hidden Gems: The 13 Best Ads of 2024 That You Haven’t Seen