Twitter stock tumbles, do advertisers want what it's selling?

Rosie Baker
By Rosie Baker | 27 July 2016
Jack Dorsey. Credit: Asa Mathat.

Twitter's stock tumbled yesterday following its second quarter results which showed stagnant user growth, slower than expected revenue increase and a downturn in ad revenue growth.

Analysts are calling it Twitter's “worst ever” growth results, and founder and CEO Jack Dorsey admitted that advertiser appetite has declined, with “less overall advertiser demand than expected”, which is a big problem for the platform. The results follow the launch of a major marketing push.

While revenue increased 20% to US$602 million for the quarter ending in June, it is the eight-straight quarter of declining growth according to Market Watch. Advertising revenue was up 18% year on year at $535m – but this marks a slowdown. Mobile advertising made up 89% of that. Its data licensing revenue accounted for $67m – a 35% year on year increase.

Ad growth is stronger outside of the US – up 33% year on year. Twitter has previously pointed to the APAC region as one of its biggest growth markets, but at this point it hasn't split out regional numbers. Nielsen data from this morning shows an 11% rise with is unique audience sitting at 6.8 million in June.

Its revenue outlook for Q3 is also lower than what analysts had been expecting.

It reported a 3% rise in user numbers to 313 million – but that is flat on the last few quarters. Of those 82% are on mobile.

In a lettter to shareholders, Dorsey said: “Our brand business remains strong in absolute terms, but there are some new challenges that we’re now tackling head-on. First, there is increased competition for social marketing budgets, which requires us to continuously raise the quality bar on the advertising solutions we bring to market. Second, while we have worked to drive higher ROI for advertisers (by leveraging our current user base, ad formats and innovations in targeting, creative and measurement), we’re still priced at a premium CPE relative to others. This has proven to be a headwind in growing Twitter’s share of overall social budgets and in our ability to grow faster in both video and performance advertising.”

To tackle the slowdown in interest from advertisers Twitter is aiming to focus on advertising solutions beyond social marketing so that it can carve out dollars from performance (which is a US$120 billion market globally) and premium mobile video budgets (which are around US$10bn in the US). To do say, he says Twitter will focus on three things: building a rich canvas for marketers; driving increased ROI with improved measurement, bidding, and relevance; and increasing scale by leveraging Twitter’s unique total audience.

Twitter is preparing the launch of additional features and functions including accurate audience verification, reserved buying, and reach and frequency planning and purchasing.

In the results statement Dorsey said: “We've made a lot of progress on our priorities this quarter. We are confident in our product roadmap, and we are seeing the direct benefit of our recent product changes in increased engagement and usage. We remain focused on improving our service to make it fast, simple and easy to use, like the ability to watch live-streaming video events unfold and the commentary around them.”

Anthony Noto, Twitter’s CFO added that the company believes it can “drive sustained engagement and audience growth over time”.

He pointed to its live-streaming video product and other video initiatives and areas with strong momentum.

Earlier this week Twitter partnered with Seven to make exclusive video content from the Olympics available through its Amplify product.

He also reiterated Twitter's five core priorities: refining its core service, live-streaming video, creators and influencers, safety, and developers.

Twitter, which now calls itself a news platform not a social platform, released a major marketing push at the start of this week led by CMO Leslie Berland. It introduced the line 'What's Happeneing' as a strapline to the ads, and although it's not a brand slogan per se, it's designed to articulate the opurpose of Twitter.

She told AdNews this week ahead of the launch: “It was really interesting to see that cut across the board and we realised we clearly had a lot of work to do to clarify, explain and educate on what Twitter is about. What we really we felt we needed to do from a marketing perspective was to bring the vibrancy, the colour, the electricity and the passion that comes through from Twitter."

Behind the news analysis:
Twitter is ubiquitous. I use it every day – but does anyone beyond the media and entertainment worlds? It's big in sports and its Live proposition will boost that. If it went away would I miss it – sure, but would advertisers?

Twitter is talking a good game. On paper its new products make sense, its moves into the performance and mobile video space are obvious and could be fruitful, but will any of it work for Twitter in the short, medium or long-term?

The platform has been desperately vying for advertiser support since before its IPO and while ad revenue is still making gains, it is at a slower rate, and the appetite has never seemed to be there in the same way it is for Facebook.

The platform has launched a slew of new products designed to give advertisers more opportunity to integrate with the platform and reach users but still each quarter the market is disappointed with Twitter's performance.

Berland, who came from Visa and is a top brass consumer marketer, was appointed in January as the company’s first chief marketing officer – a signal Twitter knows it needs to boost its rapport with consumers as well as advertisers. Earlier this year in Cannes, Berland told AdNews that she is currently undertaking a review of all aspects of the marketing function including the way its teams operate, its agency relationships and the way it tackles consumer marketing. It seems there are a host of things underway - none of which are ready to be revealed.

The issue it faces is that while people know about Twitter and it has high awareness, people don't necessarily understand what it's for and why they would use it.

The results posted today, show that Twitter still has an uphill battle with both consumers and with advertisers.

Read the AdNews interview with Jack Dorsey from his recent visit to Australia here.

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