Twitter released its second-quarter results, which show steady growth in users and revenue, as the platform works to maximize growth in line with its ambitious expansion goals for the next three years.
First, about users – Twitter’s monetizable daily active users (mDAU) reached 206 million, up 11% from last year’s first quarter and 7 million more than in the first quarter.
As you can see here, all of this growth occurred in international markets, with Twitter’s mDAU count in the U.S. down slightly from last quarter (38 million in Q1).
This could be a result of the much-discussed “Trump hit,” with many suggesting that the former president’s affection for the platform likely spurred an increase in its usage. That may or may not be true, but since Trump is now out of the headlines, perhaps fewer people are discussing issues that generate more tweets, which may be a result of the impact.
Whether this will become a permanent problem is another question. Twitter has only had a million new users from the U.S. in the past year, and since the company derives most of its revenue from the U.S. market, this could be a problem if local growth continues to stagnate. Twitter also saw a 69 percent increase in revenue in the international market, which mitigates this problem somewhat, but it is nonetheless an element that needs to be monitored going forward.
Another concern could be the growth of the platform in India, which has also been a key contributor to overall usage statistics. During the pandemic, Twitter use in India grew by about 74%, and the 18.8 million users in that region became the company’s third-largest user market after the U.S. and Japan.
India is a key growth market for all social apps, but more recently Twitter has clashed with Indian regulators over new rules that give the Indian government more control over local content removal and user information requests. Having initially rejected the updated requirements, Twitter has now said it will comply with the ruling, but tensions have arisen between the two sides. If the Indian government takes further action against Twitter, as it has repeatedly threatened to do, it could deal a significant blow to the company’s growth momentum.
But so far, that hasn’t happened, and the numbers show that Twitter is well on track to meet its growth forecasts, and its increased focus on product development is helping to generate new interest – even if, as with Fleets, not everything is going according to plan.
Last week, Twitter announced that it will discontinue Fleets next month, but the upside will be a greater emphasis on audio Spaces, which will now occupy the top of the feed. Twitter is also adding a new, dedicated tab for Spaces in the app in an effort to capitalize on the social audio trend and increase user engagement.
Some will consider Fleets a failure, but the fact that Twitter is trying and repeating itself so quickly seems positive, even if it takes resources away from development as a result. Twitter claims that research and development spending rose 39 percent over the period.
In terms of revenue, Twitter posted a high of $1.19 billion in the second quarter, a 74% increase over last year.
According to Twitter:
“Total international revenue was $537 million, up 69%, or 64% on a constant currency basis. Japan remains our second-largest market, up 40% and generating $151 million, or 13% of total revenue in the second quarter. Revenue in Japan declined sequentially in the second quarter, reflecting typical seasonality by country.”
The vast majority of Twitter’s revenue came from advertising ($1.05 billion), interest in which increased sharply as a result of the pandemic-driven e-commerce growth. This demand is likely to remain high in the second half of the year (after the Olympics) as the vaccine continues to spread and more regions look to fully resume operations and return to normal business.
“[We saw] strong demand from advertisers looking to launch new products and services, as well as to highlight what’s happening on Twitter in a number of key verticals, including technology, automotive, media, entertainment and fashion. Our strong growth in MAP and results-driven advertising also continued in the second quarter.”
Twitter also notes that SMB customers increased total ad spending this quarter, and total ad impressions increased 32%, driven by an increase in users and ad inventory.
Also this:
“Cost per engagement (CPE) increased 42%, largely due to similar price increases for most ad formats caused by the impact of COVID last year.”
So, because of the downturn in the second quarter of 2020, Twitter claims that the increase here is disproportionate, but it’s worth keeping an eye on Twitter’s CPM numbers anyway.
Another element of particular interest is Twitter Blue, the platform’s new subscription offering, which is currently being tested in Australia and Canada. This option is Twitter’s first big step toward direct monetization of users, which could provide another way to generate revenue – if users are willing to pay for additional elements of tweets.
So are people still paying?
Twitter included this general note about using the Blue option in its letter to shareholders:
“We were encouraged by the initial response and look forward to further innovating and growing this new revenue stream through additional features, geographic expansion and other offerings as part of our revenue growth strategy.”
That doesn’t give much away (Twitter also noted similar things about Fleets in its first-quarter update), but it’s probably too early to tell at this point, since the offering only became available last month.
Also, if you’re wondering why Twitter has been inserting more themed prompts into your tweets feed lately:
“We’ve also improved our ability to quickly connect people to the best conversations about their interests by making better use of inclusion cues and introducing interactive feedback on themed tweets in the main feed. As a result, 41% of new customers in supported languages now follow Topics during sign-up, averaging ~14 Topics each.”
Thus, Topics is working to improve content discovery on Twitter, which can help maximize engagement. However, Twitter recently noted that after complaints from users, it is reducing the frequency of Topics prompts in the stream.
Overall, this is a strong update from Twitter, although it does benefit from a slowdown in the second quarter of 2020 compared to the previous year. I’m not sure how well this positions the company to meet its goal of 123 million users by 2023, but the revenue numbers look level and moving in the right direction.
