The disconnect between Twitter’s Q2 financial report and the user numbers
Twitter’s CEO Jack Dorsey stated during the Q2 financial briefing that the company has been experiencing impressive audience growth on its social platform, as well as audience engagement. He revealed that the monetizable daily active users (mDAU) increased to 186 million in Q2, which represents a 34% YOY increase. He also pointed out that it was the highest year-over-year growth that the company has ever reported ever since it started reporting mDAU growth.
However, there is clearly a disconnect that exists between the user numbers and the company's financials. Unfortunately, this disconnect has existed for a while. Although the COVID-19 pandemic may have further exasperated the poor financial figures from Q2. The bulk of Twitter's revenue comes from advertising, but the demand for advertising on its platform took a hit in March and April during the lockdown.
Despite that, it is clear that the company has not really been doing as well as they hope when it comes to ad revenue. However, Twitter has been hard at work, trying to change that. The company's Chief Financial Officer, Ned Segal, recently pointed out that the demand for advertising on its social platform is getting back to normal. He also added that the company has finalized rebuilding its ad server, which is part of its strategy to kick its ad performance into high gear. Mr. Dorsey also noted that they are exploring other avenues of generating more revenue, and one of the ideas on the table is a subscription model.
An unfair share of disruption?
Twitter has suffered quite a number of challenges so far this year. The coronavirus has clearly had a negative impact on its revenue with the demand for advertising going down. There is also the recent hacking of Twitter accounts belonging to high-profile individuals. The hacking incident created concerns that hackers can take advantage of the platform to spread misleading agendas. This may erode the trust that the company has built over the years, thus discouraging organizations and politicians who advertise on the platform. Advertisers also boycotted the social platform during the latest protests seeking racial justice.
Twitter also faced a lot of criticism for its stance on political advertising and fact-checking policy. For example, the company blocked political ads, but people pointed fingers at its inability to handle misinformation, especially from politicians. One particular incident that led to a lot of backlash after President Donald Trump posted a video in February, in which House Speaker Nancy Pelosi rips up a paper copy of the president’s State of the Union speech. Twitter refused to pull down the video even after claims that it misled viewers.
Twitter claimed that it did not pull down the video because it was a tweet and not an advertisement, so it was not paid for. They also added that the video did not violate any of the current guidelines. This highlights one of the major issues that Twitter is currently facing. The inability to streamline its rules and guidelines.
What to expect moving forward
Twitter has been vocal about the changes it is making in an attempt to improve its performance, especially revenue. As noted earlier, the company is looking for other means of generating revenue, and it is even contemplating a subscription-based service. Twitter is also reportedly planning to introduce a feature that will allow people to post audio recordings. This is aimed at facilitating more engagement on the platform. This may play an important role in the overall goal of making the microblogging platform more appealing to people and thus more appealing to advertisers.
Twitter is hoping to benefit from its rival Facebook's decision to ban many companies from advertising on its social platforms. The list of companies banned by Facebook has more than 30 companies and includes some major corporations. Examples of the major companies that have been banned include Adidas, Ford, Coca-cola, Microsoft, Pfizer, Unilever, Verizon, and many more.
Now that those companies have been banned from Facebook, they might double down on their ads on Twitter. This would provide a significant boost to the company in terms of revenue and encourage other companies to jump on board.
Although Twitter continues to struggle with generating enough revenue despite having impressive user engagement figures, the company hopes that the new strategies it plans to roll out will help attract more advertisers, thus boosting its revenue-generating capacity. It also has some ways to go as far as ironing out some of the kinks around its user policy.