Twitter suffers revenue decline as advertisers retreat
Twitter’s Q2 results have been released, showing a company paying the price of transition. The social media company made some baby steps towards stability in revenue and audience retention, but was stymied by the ongoing chaos about its delayed purchase by Elon Musk and advertisers cutting budgets.
The company reported its Q2 2022 results on Friday 22nd July
In the wake of Snap’s disappointing results, Twitter followed suit in announcing its overall revenue for the three months to 30 June was £986m, representing a decline of 1% ($270m), on the same period last year. It, too, blamed an ongoing slowdown in ad spend in key sectors for its poor showing, saying “advertising industry headwinds associated with the macroenvironment" was one cause of its cash-flow problem.
It also noted that the ongoing uncertainty surrounding Elon Musk’s takeover and subsequent operation of the company was a factor in the reduced revenue. As advertising represents around 90% of Twitter’s overall revenue base, that destabilisation has had a significant impact on the company’s bottom line.
Despite that Twitter has made some inroads into countering some of its fundamental issues around user growth and revenue diversification. Its key metric of monetisable daily active users (MDAUs) grew 16% to 237.8 million, narrowly missing analyst expectations.
Engagement has been a major priority for Twitter since last year. " Its then-chief exec Jack Dorsey had said: "As we enter the second half of 2021, we are shipping more, learning faster, and hiring remarkable talent. For example, our increased shipping cadence contributed to reaching 206 million average monetizable DAU in Q2, up 11% year over year and 3% quarter over quarter. There's a tremendous opportunity to get the whole world to use Twitter."
As a result much of its focus since has been about pushing for better performance from the audience it does have. Ned Segal, Twitter's CFO, stated: "We delivered better-than-expected performance across all major products and geographies while growing our audience. We continued to make significant progress on our direct response and brand products with updated ad formats, improved measurement, and better prediction. We are driving more value for advertisers with our strong push into performance-based advertising and expanded offerings for small and medium-sized businesses."
Insider Intelligence principal analyst Jasmine Enberg noted that, from an investor perspective, the longer-term outlook for Twitter is stabilising, with an increasingly engaged user base: “One bright spot was engagement. Twitter is a platform that thrives on news and controversy, and there was plenty of that to go around in Q2. In the US, monetizable daily active users (mDAUs) grew more than twice as fast year-over-year in Q2 than they did in Q1. But user growth may not be enough to convince advertisers to spend on Twitter, especially at a time when many advertisers’ budgets are tightened.”
Twitter is understandably seeking to wrap up its legal dispute with Elon Musk in the immediate future, though the billionaire seeks to drag out the court case. The preponderance of expert opinion backs Twitter in terms of having fulfilled its terms of the acquisition; but the damage from Musk’s botched takeover deal is nevertheless hurting Twitter.