Twitter revenue jumps with ad renewal success

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Twitter’s revamping of its ad offerings paid off in the second quarter as it reported a sharp jump in revenue and indicated plans to build its e-commerce capabilities.

In a letter to shareholders, Twitter cited “revenue improvements, strong sales execution, and a broad increase in advertiser demand” as key factors to increasing revenue 74 percent year-over-year to $1.19 billion during the second quarter. This consensus exceeded expectations of $1.06bn.

The company recently overhauled its offering to advertisers in an effort to improve its targeting capabilities and make it simpler for small businesses to run campaigns. It added that user interaction with ads rose 32 percent, while the cost of engagement rose 42 percent year on year.

In an interview with the Financial Times, Ned Segal, chief financial officer, said the company wanted to facilitate more online shopping on the platform, as rivals Facebook and TikTok boost investment in the space.

He said Twitter plans to introduce a “buy button” for ads in the future, so users can buy things directly on the platform without leaving. He added that Twitter business profiles will also be able to have a “buy button” on them. The company had previously offered a buy button but dropped it in 2017 after it failed to gain traction.

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“We will continue to work to ensure that we can help filter transactions, whether they are across borders or within the same geographic area, reducing friction as much as possible,” he said. “Trade is an important part of our long-term strategy.”

Twitter shares rose about 5 percent in after-hours trading after the earnings release.

The number of monetized daily active users on Twitter — a local metric that counts the number of registered users the platform displays ads — rose 11 percent year-over-year to 206 million, in line with analyst expectations.

However, Twitter users in the US have fallen by 1 million since the first quarter, to 37 million, which Seagal attributed to a quieter news cycle and people emerging from lockdowns, among other factors.

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After losing user growth forecasts in the past two quarters, the company has focused on better retention of users with its new “topics” feature, which helps users quickly find content that aligns with their interests. “We continue to improve notifications and the importance of what people see on their schedule,” Segal said.

Twitter expected third-quarter revenue to be between $1.22 billion and $1.3 billion, higher than current analyst estimates of $1.17 billion, according to S&P Capital IQ.

The company is also developing a number of other features, including tipping or opt-in creators tools, in an effort to increase engagement and diversify revenue beyond advertising.

It now expects headcount and expenses to grow at least 30 percent for the full year, up from the 25 percent it provided in the previous quarter.

Separately on Thursday, Snap also posted ample quarterly results, with sales jumping 116 percent year-over-year to $982 million, well above analysts’ expectations for an increase to $846.67 million. It is also building its own e-commerce capabilities, with a focus on using augmented reality to allow users to try on clothes online before making a purchase.

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