Twitter staged a spectacular comeback with a stellar Q2 2014 earnings report yesterday. The social media giant had been under close scrutiny ever since its first quarter earnings where its slow user growth and lack of profitability was exposed. In today’s earnings call, the Twitter executive team was able to answer much of the early criticism, and of course, gloat over the company’s healthy financial performance.
For digital marketers, here are five of the biggest takeaways from the earnings call.
1) Twitter is profitable for the first time in its history
It looks like all the big moves Twitter has been making towards courting advertisers are paying off. The company’s revenue this quarter was $312 million, up 124% from last year, but more importantly, it posted a net income of $15 million. That’s a profit of about 2 cents a share, contrasting with the 1 cent loss predicted by analysts. It’s the first time Twitter has posted a profit in its history, and it comes on the back of the many ad products it has added this quarter, including app install ads, Twitter cards and better audience targeting features.
The growth problem hasn’t been solved, but it’s better
Twitter’s user growth figures definitely improved this quarter. It posted 271 million monthly active users in Q2, up 24% over last year. Twitter CEO Dick Costolo said this was the “highest number of absolute net new user adds in five quarters.” Skeptics can point to increased engagement levels due to the World Cup, but Costolo was quick to clarify that the huge event, while promoting plenty of activity within Twitter’s existing user base, did not contribute significantly towards adding new users.
The key figure for advertisers however is the growth in US users, which remained stagnant. Twitter recorded 60 million monthly active users for the US in Q2, which was a net addition of 3 million users. That’s exactly the same net addition number it posted in Q1 2014, which shows how much of its growth is coming from international users.
Twitter is more reliant on mobile revenue than Facebook
In Q2 2014, Twitter’s total advertising revenue was $277 million, an increase of 129% year-over-year. Out of that, 81% came from mobile ads. That’s an even bigger percentage than Facebook, which attributed 62% of its revenue to mobile. This underlines how much Twitter is focused on mobile, and in a lot of ways, how the device is a natural home for its minimalistic design and function. Marketers looking to leverage Twitter to promote their brand should envision a mobile first strategy in every campaign they run.
Expect Twitter ad prices to go up
Despite the big revenues, Costolo said Twitter still has some way to go when it comes to monetization. “We are at a very, very low level of advertising load or coverage and we have the significant opportunity to increase that, not just relative to our public peers but also just generally,” said Costolo in the earnings call. He also said the next goal was to improve the click through rates of ads through better targeting and display formats, helping marketers achieve specific objectives.
With the addition of new advertising tools and technology, Costolo said marketers should also be prepared for ad prices to increase. “As we continue to drive scale – which advertisers are looking for in a specific target – we continue to have new products that are more targetable and more appropriate for the specific marketing objective, ROI will go up,” said Costolo. “And as ROI goes up, advertiser demand will increase and that will continue to drive price.”
Expect “promoted video” ad offering in August
Building on its relationships with video content providers such as TV shows, sports networks and feature films, Twitter is going to make promoted video clips its next ad tool. It acquired video content promotion platform SnappyTV earlier this year to aid in these efforts, which will complement its existing TV targeting ad tools. New CFO Anthony Noto said the new promoted video offering will launch its beta version in August, and will “provide a way for high quality content producers and brands easily upload, share and measure the distribution and effectiveness of their video content on Twitter.”