Twitter’s revenue and user growth story – especially US user growth – is grounded in a harsh reality.
Overall revenue for the quarter came in at $574 million, down 5% year over year. Ad revenue was also down 8% on a YoY basis, clocking in at $489 million. This is the third quarter in a row of discouraging revenue reports from Twitter.
It added no new monthly active users quarter over quarter – stagnating at 328 million – and its US users in that period declined from 70 million to 68 million. Any Trump bump last quarter appears to have been more of a Trump blip.
If the trend of users leaving continues, it’s fair to wonder if advertisers will follow.
While Twitter couldn’t account for its US decline, it placed much of the blame for the revenue decline on the shoulders of TellApart, the desktop retargeting platform it bought in 2015 for $479 million as part of a plan to recharge its languishing direct-response business – but that didn’t pan out.
Twitter CFO and COO Anthony Noto told investors Thursday that the $75 million headwind facing the company this quarter is due to de-emphasized revenue products, primarily TellApart.
Last quarter, Twitter said that it was in the process of pulling the plug on the TellApart business. The expectation is for TellApart to be at zero revenue by Q4.
Excluding the TellApart headwind, Noto was quick to point out that revenue would only have declined by 2% in Q2, compared to the 8% YoY revenue decline in Q1. He took this bitter comfort as an encouraging sign indicating “an inflection point in our total revenue growth.”
“While we still have a lot of work to do for revenue growth to get it to track audience growth,” Noto said, “the improvements in revenue growth reflect the progress executing against our top revenue-generating priorities in the second quarter, as well as strengthening business fundamentals.”
Although Twitter’s DR and social products were down YoY, they performed “better than expected,” Noto said, enabling Twitter “to stem that decline and see an inflection point in those products as well.”
Twitter is banking heavily on live video to right its ship. In May, it made its debut at the NewFronts, where it ballyhooed the launch of a 24/7 streaming news service in partnership with Bloomberg and made a pitch to advertisers centered on live streaming and real-time content.
In the second quarter, Twitter delivered more than 1,200 hours of live video, an increase from 900 hours last quarter and 600 hours the quarter before that. Unique viewers increased quarter over quarter by 22% to 55 million.
Early advertiser interest in live is there, said Noto, pointing to linear improvement in spending across its existing global and US upfront advertisers in both May and June compared to April.
“We’re starting to tap into new advertising budgets,” he said. “The digital NewFront commitments that we’re getting are really positive and they’re coming from areas outside of digital media. … [And,] in some cases, they will be firm commitments.”
And although TellApart turned out to be a wash, Twitter isn’t turning its back on ad tech. In mid-May, Twitter hired ad tech vet Bruce Falck, former CEO of Turn and former COO of BrightRoll, to lead its revenue product team.
“[We’re] really excited about Bruce,” said CEO Jack Dorsey. “He has been spending the last six weeks sitting down with the team, validating all of our plans and our strategy and continuing to simplify and differentiate the product and really focus the team on our ROI."
Twitter is actively recruiting in the machine learning space, including roles related to ad targeting. Last week, Twitter posted a handful of job descriptions looking for talent with expertise in algorithms for image and video classification; identifying context for text, video and images; and predicting consumer engagement and likelihood to convert.