Twitter ad revenue shrank 27% from mid-March despite strong user growth

Twitter's advertising revenue growth was sluggish for first three months of the year, despite posting its strongest-ever year-on-year growth in monthly users amid demand for coronavirus information.

Total ad revenue reached $682m in the first three months of 2020, up 0.4% year on year – something that Twitter said reflected a strong start to the quarter that was impacted by widespread economic disruption caused by pandemic lockdown measures beginning in March.

Twitter said January to early March performed "as expected", with strength in the US and some coronavirus-related weakness in Asia.

However, from 11 March, when many events around the world began to be cancelled, Twitter said total ad revenue declined by 27% year on year – this is in broadly line with Google and Facebook's financial reporting this week. The downturn was particularly significant in the US, while advertising weakness in Asia was beginning to subside as work and travel restrictions were gradually lifted.

Live events content partners 'adapted quickly'

In recent years, Twitter has sought to promote itself as the place to have conversations around live events, having made its name as a messaging platform for breaking news and comment from celebrities, political figures and journalists. However, a reliance of live events would appear problematic for the second quarter, which is already a month in and it remains unlikely that big sporting and entertainment events will happen at all in Europe and North America before July. Twitter has exclusive content deals in the US with Major League Soccer, the National Football League and NBC’s Olympic Games coverage (now postponed until 2021).

To mitigate live events being cancelled, Twitter's content partners quickly adapted by "showing clips from previous events as a way to continue to engage with their fans and the conversation".

There was, perhaps unsurprisingly, no mention in Twitter’s quarterly letter to shareholders that addressed the fiasco surrounding founder and chief executive Jack Dorsey, who agreed to relinquish three board seats last month after pressure from Elliot Management, an activist investor. Dorsey has been criticised by commentators for splitting his chief executive duties between Twitter and Square, the mobile-payments company, and for planning a months-long sabbatical to Namibia this year.

Nevertheless, Dorsey was able to point to strong user growth this quarter of 24% in average monetisable daily active user growth, Twitter’s unusual self-reported metric. He said: "In this difficult time, Twitter’s purpose is proving more vital than ever… Public conversation can help the world learn faster, solve common problems and realise we’re all in this together. Our task now is to make sure we retain that connection over the long term with the many people new to Twitter."

This user growth was clearly driven by the pandemic, as people took to Twitter for information and reaction to the global crisis and also settled into new working-from-home routines. The absolute number of MDAUs stabilised towards the end of March, Twitter added, suggesting that it may not see a similar surge in the second quarter unless conditions change significantly.

New ad formats

Twitter is continuing to make back-end changes that it hopes will enable the platform to become faster at turning around new formats via a new ad server, which it expects to be finished by July and had some limited success in handling Super Bowl advertising traffic in February.

It is also trying to woo smaller advertisers, whose business has been monopolised by Facebook’s self-serve formats that allow relatively low-cost display advertising with narrow audience targeting. Large- to mid-tier customers continue to represent a sizeable majority of Twitter’s ad revenue.

Twitter said it recently began pilot-testing direct-response ad formats, beginning with Mobile Application Promotion: "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 personalised 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."

Meanwhile, it reported that total ad engagements went up by 25%, driven by increased impressions from having a greater audience growth, while clickthrough rates grew on a year-on-year basis across the majority of ad types.

However, cost per engagement decreased by 19%, driven by like-for-like price decreases across most ad formats and lower demand in March.