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Twitter sees user growth slow, but advertising jumps

Twitter Bird
Twitter sees strong advertising and revenue growth

Twitter Inc on Tuesday beat analyst expectations for quarterly sales and profit and followed its social media peers to forecast a strong start to 2021 as ad spending rebounds 31 per cent from a rock bottom.

Ad revenue was $1.15 billion, up 31 per cent from the same period a year ago and beating analyst estimates.

Twitter said that user growth rates may decrease to “low double digits” beginning in the second quarter.

Total revenue came in at a record $1.29 billion, an increase of 28 per cent year-on-year. Shares of the company were up nearly 3 per cent in extended trading, adding to a 11 per cent gain in stock so far this year.

The social media company said expenses would rise 25 per cent or more in 2021 but projected that total revenue would grow faster than costs.

In the fourth quarter, Twitter said it had 192 million average monetisable daily active users (mDAU) – its term for the number of daily users who can view ads. That’s up 26 per cent from a year earlier. Analysts were expecting 196.5 million, according to IBES data from Refinitiv.

Investors are looking past Twitter’s miss on user growth because of other positives during the quarter, including higher ad revenue, profitability and revenue guidance that was better than expected, said Hari Srinivasan, senior research analyst at Neuberger Berman.

Twitter said user growth had been driven by product improvements and more global conversation from events like the Covid-19 pandemic and the U.S. election. Some temporary changes to reduce misinformation around the U.S. election had a small negative impact on global user growth, it said.

Ad revenue was $1.15 billion, up 31 per cent from the same period a year ago and beating analyst estimates.

The company is building tools that help advertisers increase product sales and finely target ads to interested users, which will help Twitter earn more money from advertisers.

Twitter acquired newsletter startup Revue last month. It also recently launched disappearing tweets called “fleets” and said it had in late Q4 released a beta test of “Spaces,” its audio-chat room feature which has similarities with voice-based app Clubhouse.

CEO Jack Dorsey told analysts on a conference call that the company was working on subscriptions but did not expect meaningful revenue until next year.

Net income rose to $222.1 million, or 27 cents per share, from $118.8 million, or 15 cents per share a year earlier. Excluding items, Twitter earned 38 cents per share, beating estimates of 31 cents.

Twitter’s costs and expenses were $1.04 billion for the quarter, an increase of 21 per cent year over year. It said it expected costs and expenses to rise partly due to plans to grow headcount by more than 20 per cent particularly in engineering, product, design and research.

Twitter said it expected total revenue in the current quarter to be between $940 million and $1.04 billion.

It said it expected “modest impact” from the rollout of Apple Inc’s planned privacy changes to the iOS system.

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