Twitter reported better-than-expected first quarter results as it grew its monetizable daily active users by 24%. However, Twitter said it was a tale of two quarters as advertising revenue fell dramatically in March.
The company reported a first quarter net loss of $8.4 million, or a penny a share, on revenue of $807.64 million, up 3% from a year ago. Wall Street was expecting revenue of $776 million with a net loss of 2 cents a share. Twitter's non-GAAP earnings in the first quarter were 11 cents a share, a penny ahead of estimates.
Twitter said its advertising business in the first quarter tanked 27% from March 11 until March 31, but had enough buffer to deliver solid results overall.
The company said in a shareholder letter:
The quarter was, however, best seen as two distinct periods: January through early March, which largely performed as expected, with strength in the US and some COVID-19 related weakness in Asia, and early March through the end of the quarter, when the pandemic became global. As an indication of the rapid change in advertising behavior, from March 11 (when many events around the world began to be canceled and many in the US began sheltering in place) until March 31, our total advertising revenue declined approximately 27% year over year. The downturn we saw in March was particularly pronounced in the US, and advertising weakness in Asia began to subside as work and travel restrictions were gradually lifted.
While Twitter is seeing some recovery in Asia, it isn't providing an outlook. CFO Ned Segal said the priority is to cut expenses and focus on its revenue products such as new ad formats for direct response.
Key points in Twitter's first quarter:
- Cost per engagement fell 19% in the first quarter, but total ad engagements were up 25%.
- Average monetizable daily active users were 166 million in the first quarter, up from 134 million a year ago.
- Twitter is building out a new data center but is hampered by IT supply chain constraints.
- Data licensing and other revenue was $125 million.
Twitter also outlined its IT and revenue plans:
During Q1, we made progress on our two most significant revenue product priorities. Our first priority is our ad server rebuild, which we are focused on completing by the end of Q2. This rebuild will transition our platform to microservice architecture and we expect it will result in more efficient operation, faster innovation, and better ability to experiment. We were pleased that some of our new services on the ad server successfully handled record Super Bowl ad traffic in February.
Our second ad priority is direct response advertising, beginning with our next-generation Mobile Application Promotion (MAP) ad format. We recently began pilot testing portions of our improved offering with a few advertisers, with plans to expand the test over several phases. We see a path to driving more direct response advertising on Twitter in 2020 and beyond through this work on MAP and by increasingly helping people on Twitter benefit from a more personalized experience. An improved MAP and more direct response ad formats would increase our addressable market, with more access to advertising demand that may be more resilient through an economic downturn, while building on our strengths in helping brands launch something new and connect with what's happening.