Despite accelerated user engagement growth, Twitter missed Wall Street expectations for ad revenues. It reported on Thursday that worldwide ad revenues fell by 23% to $562 million, while the number of monetizable daily active users (mDAUs) rose by 34% to 186 million.
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Here are the most important things marketers should know:
- User engagement growth accelerated. For the second consecutive quarter, Twitter posted its highest year-over-year mDAU growth rate since it began reporting the metric in Q4 2018. The continued growth is likely a result of consumer demand for news, though it will be more difficult for it to maintain the same momentum as shelter-in-place measures are lifted. Note that Twitter’s mDAU figures are not directly comparable with daily active user (DAU) figures from other social platforms, including Snapchat, which added fewer-than-expected DAUs in Q2. Twitter defines mDAUs as users who log in to their account at least once per day from Twitter applications that are capable of showing ads.
- The social media ad boycott hit Twitter’s ad business. While Facebook has been the primary target of the social media ad boycott, major advertisers also paused spending on other platforms, including Twitter. The company said that it saw a “gradual, moderate” recovery during most of Q2 compared with the last three weeks of March, when ad revenues fell by 27% due to pandemic-related losses. In the last three weeks of June, however, Twitter’s ad revenues fell by 15% year over year as a result of advertisers suspending their advertising to protest how social platforms handle hate speech and misinformation. The company did say that demand has returned as the protests subsided.
- Direct response is (still) a thorn in Twitter’s side. Direct response has been a boon for Twitter’s competitors: Facebook has been a strong direct-response performer for years, and direct-response advertising drove Snapchat’s strong Q2 revenue growth. By comparison, Twitter’s relative lack of direct response advertisers, combined with the continued suspension of major sporting events, hurt its Q2 ad revenues. But the markets where Twitter does have a stronger direct-response performance—some of its Asia-Pacific markets, which typically have a higher mix of direct-response ad revenues than the US—reported year-over-year ad revenue growth in Q2.
- Don’t expect a subscription model … yet. Twitter confirmed reports that it is considering adding subscriptions but said it’s in the very early stages of exploring the option. It added that subscriptions is only one of several revenue streams in consideration, including commerce, and any new revenue stream must be “complementary” to its existing ad business. Twitter reiterated that its No. 1 priority remains improving its mobile application promotion (MAP) product to accelerate its road map for direct-response advertising.
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