Twitter misses new daily user target by 8 million in Q3

The company added just one million new daily users in the third quarter, missing analysts’ estimates by eight million.

Twitter has long been dependent on live events and large brand advertisers for its business [FILE: Gabby Jones/Bloomberg]

Twitter Inc. said it added just a million new daily users in the third quarter, 8 million fewer than analysts estimated, despite the return of live sports and a U.S. election campaign that were expected to drive people to the platform. The stock plummeted about 10% in extended trading.

Advertisers, however, flocked back to the San Francisco-based social media company, driving quarterly sales well above analysts’ estimates, in a sign the digital advertising business is returning following the outbreak of the global pandemic.

Sales increased 14% to $936 million in the period ended Sept. 30, the San Francisco-based social media company said Thursday in a statement. It was the biggest jump since the second quarter of 2019. Analysts projected a 5% decline to $780.5 million, according to data compiled by Bloomberg. In a letter to shareholders, Twitter cited the return of live events, such as professional sports, and product improvements as key drivers of revenue.

Twitter is one of three internet companies under intense pressure from U.S. officials over their treatment of political content. Twitter’s chief executive officer, Jack Dorsey, testified alongside the heads of Facebook Inc. and Google at a Senate panel on Wednesday. In the results Thursday, the company didn’t give a forecast for the holiday quarter but suggested that uncertainty around the election could be a business factor.

“It is hard to predict how advertiser behavior could change,” the company wrote in its shareholder letter. “In Q2, many brands slowed or paused spend in reaction to U.S. civil unrest, only to increase spend relatively quickly thereafter in an effort to catch up.”

There was some concern that Twitter’s business would be affected by a wide-ranging ad boycott in July, when a number of high-profile brand marketers pulled spending from social media companies over frustration with their content policies.

Twitter, unlike Facebook, has long been dependent on live events and large brand advertisers for business but said in April it also needed to improve its direct-response ad product, which is typically more useful for e-commerce advertisers looking to drive immediate sales. At the time, Twitter executives called better execution on these kinds of ads a “top priority.”

But in the shareholder letter, Twitter said a new version of these types of ads is now delayed until 2021 so the company “can integrate expected new industry-standard mobile privacy requirements.” Ned Segal, the chief financial officer, confirmed that the delay is partly due to expected updates related to Apple Inc.’s iOS 14 software update. Some changes to Apple’s software will affect how online advertisers can track people around the web, but those changes have been postponed until early next year. Twitter is waiting to see how they are implemented, Segal said.

Twitter reported 187 million daily users at the end of the quarter, an increase of 29% year-over-year, but a paltry gain over the previous period. Twitter added 20 million new users in the second quarter.

Twitter said in July that it was exploring additional business lines, including subscriptions and “managing pay walls,” but those efforts were not highlighted in the company’s shareholder letter.

Source: Bloomberg