Twitter’s ad business has struggled to build any kind of momentum so far this year, in stark contrast to its rivals, with the company also downbeat on future revenue forecasts – indicating that the social media service has failed to fully capitalize on the pandemic-initiated digital advertising boom.Over the first quarter, Twitter reported revenue of $1.04bn, up 28% from $808m a year prior.
Twitter’s ad business in numbers
Twitter’s ad revenue rose 32% year-over-year to $899m, with total ad engagement up 11%, indicating steady if unspectacular progress.
Both revenues and user numbers were broadly in line with analyst expectations – a disappointing performance given the spectacular performance of digital ad firms such as Facebook, Alphabet and Amazon.
In a cautious shareholder update, Twitter warned that a recent surge in user growth was unlikely to be sustained as lockdowns ease, leading to ‘low double-digit growth’ for the immediate future.
Twitter now expects second-quarter revenues to fall somewhere between $980m and $1.08bn – likely undershooting a Wall Street estimate of $1.06bn.
Why does it matter?
Asked to explain the relative underperformance, chief financial officer Ned Segal blamed a dependence on marketers taking out brand advertising campaigns which generally get planned after the Christmas break.
“When there is unrest for one reason or another,” Segal told analysts, brand advertisers “often pause when there is a more important conversation than the conversation around their product.”
Pointing to a rebound in advertising in March, Segal stressed that revenues would fall on the upper end of estimates if maintained.
Twitter is dependent on big brand advertising for 85% of total sales, with direct response advertising such as retailers and small businesses which have boomed during the pandemic forming a relatively insignificant share.
OK, anything else?
Twitter also announced that the number of daily active users increased 20% to 199 million in the first quarter, a 7 million increase over the previous quarter.
This bore out a February estimate of 20% year-over-year growth in the first full quarter since former US President Donald Trump was banned from the platform.