Twitter Beats Estimates, Sees Rebound in Ad Sales in Asia

Image: Jack Dorsey, CEO (center) and Twitter associates. Source: Twitter.

By Paresh Dave and Elizabeth Culliford

OAKLAND, Calif. (Reuters) – Twitter Inc on Thursday said its ads sales slightly rebounded in Asia after a plunge due to the coronavirus outbreak and it had accelerated work on tools to attract advertisers, becoming the latest tech company to report a lighter blow from the pandemic than forecast.

Twitter shares jumped 11 percent in premarket trading.

The San Francisco-based social media company announced greater first-quarter revenue and a smaller loss than financial analysts had expected. Daily users who can view ads grew 24% to 166 million, about 2 million above estimates, as people looked to Twitter for information related to the virus.

Twitter provided neither its usual guidance on sales for the current quarter nor any comment on whether U.S. ad sales had bounced back as well. It did warn of smaller increases in non-advertising revenue. Making development of ad tools its No. 1 priority also could complicate efforts to maintain user growth late into the year.

But the first-quarter results and signs of recovery mirrored those seen over the last week from Twitter’s main competitors for advertisers, including Facebook Inc, Google parent Alphabet Inc and Snapchat maker Snap Inc.

Shares of those companies, including Twitter, have surged in the last week, erasing most or all their declines for the year.

The novel coronavirus halted travel, retail and entertainment in much of the world by March, leading to sudden budgets cuts at many advertisers and generating concerns about the prospects of ad sellers.

About 84% of Twitter’s revenue comes from ads on its service and partner apps, and those sales were 27% lower in the last three weeks of March than the same period in 2019, the company said on Thursday. But sales bounced back in Asia during late March as lockdowns lifted there, Twitter said, without providing specific figures.

In addition, Twitter said it hoped to release tools earlier than planned this year to attract business from mobile games and other app makers. Those companies are trying to gain market share among consumers stuck at home and are continuing to buy what the ad industry calls “direct response” ads.

Google on Wednesday also said it expected revenue from direct response ads sold by its YouTube unit to return to normal faster than from other ad types.

SLASHING COSTS, PRIORITIZING SALES

Twitter’s first-quarter revenue was $808 million, or 3% growth compared with a year earlier, above the average estimate of $776 million among analysts tracked by Refinitiv.

Twitter had rescinded on March 23 its first-quarter revenue outlook of between $825 million and $885 million because of virus-related uncertainty.

The company said that sales growth from licensing users’ posts to researchers and marketers, which was 17% in the first quarter, is expected to “moderate” the rest of the year.

Twitter lost $8 million in the first quarter, or a penny per share, better than the average estimate of two cents per share.

The opening of a new data center to host tweets and user information could be pushed back because the virus made it difficult to acquire materials and required spending on improving some existing infrastructure, Twitter said.

Twitter is aiming to stem losses by slashing its own budgets, including by limiting hiring to product development, research and user support. Expense growth in 2020 is likely to be in “the low teens,” versus earlier plans to spend 20% more than last year, Twitter said.

Focusing its product teams on advertiser tools could pose challenges for Twitter Chief Executive Jack Dorsey. He pledged in February to launch new features for users this year at a faster pace to stoke growth, while committing to activist investor Elliott Management on March 9 that he would increase daily users by at least 20% this year.

The growth goal was part of an agreement allowing Dorsey to remain CEO as a revamped board of directors evaluates Twitter’s leadership structure and CEO succession plan. Elliott had expressed concern about Dorsey, who is also CEO of financial tech company Square Inc (SQ.N), taking on too much.

Reporting by Paresh Dave; Editing by Lisa Shumaker and Nick Zieminski.

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Source: Reuters