Friday , June 5 2020

Twitter’s advertising business hit hard by impact of Covid-19

Bloomberg

Twitter Inc. has more users than ever, but its advertising business was hit hard by the Covid-19 pandemic at the end of the first quarter.
The social-media company reported revenue of $808 million in the period, ahead of Wall Street estimates of $773 million, according to data compiled by Bloomberg. The shares surged about 10% in early trading. From March 11 to the end of the quarter, sales were down 27% year-over-year. The decline was particularly pronounced in the US, Twitter’s most valuable market.
The San Francisco-based company plans to reduce costs by cutting down on hiring and eliminating travel and events that are no longer necessary given employees are working from home. It still plans to build a new data center in 2020 as was previously announced.
Twitter reported a net loss of $8 million, its first unprofitable quarter in more than two years. The company previously announced it was cutting full-year guidance and expected an operating loss in the quarter.
The pandemic has led to record usage, however. Twitter now has 166 million daily users, up from 152 million at the end of 2019, and 24% higher than a year earlier. That’s the fastest growth since the company started reporting the metric in 2016. Twitter credited the gains to “typical seasonal strength, ongoing product improvements, and global conversation related to the Covid-19 pandemic.” The company previously highlighted user growth in a blog post in early April.
More users did not lead to a similar increase in sales, which rose just 3% year-over-year. Part of that was the result of an industrywide ad slump as marketers pull back on spending. But Twitter has also struggled to build the kinds of ad products that have enriched competitors including Google and Facebook Inc.
Chief Financial Officer Ned Segal said Twitter has mostly attracted brand marketing, rather than “direct response” ads that are easier to measure, grow faster and have been more resilient during the crisis so far.

Twitter said that improving its ad products “has been elevated to our top company priority,” and direct response ads are at the top of the list. In a letter to shareholders, Twitter said these marketing spots could “increase our addressable market, with more access to advertising demand that may be more resilient through an economic downturn.”
Not addressed in Twitter’s shareholder letter was whether the recession threatens Chief Executive Officer Jack Dorsey’s job. Activist investors tried to push him out earlier this year. Dorsey survived, but the two sides agreed to a series of performance goals that include accelerating revenue growth. The coronavirus outbreak will make that particularly difficult.

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