Covid-19 Crisis Hits Twitter’s Advertising Business

While reporting a record number of users, Twitter Inc. has also reported a severe hit to its advertisement revenues because of the novel coronavirus pandemic for the first quarter fo the current year.

During the period, revenues of $808 million was reported by the social media company which comprehensively beat estimates of Wall Street analysts which was at $773 million, according to data compiled by Bloomberg.

The better than expected performance of the company pushed its shares up by 10% in early trading.

A number of cost reduction strategies have been taken up by Twitter which includes cutting down on hiring and eliminating travel and events that it will deem to be unnecessary, said the San Francisco-based company. The cost cuts will be possible and are realistic because most of the employees are currently working from home. The company however confirmed that its previously announced plan of building a new data center in 2020 will be implemented.

In what was its first loss making quarter in more than two years, Twitter reported a net loss of $8 million for the first quarter of the current year. An announcement of slashing of its full-year guidance had already been made by the company. Twitter now expects to incur an operating loss in the current quarter. No new guidance was issued by the company.

However the company reported record usage of its service s during the coronavirus pandemic. At the end of the first quarter, there were 166 million daily users compared to total user base of 152 million at the end of 2019. The first quarter number was 24 per cent greater than the comparable period a year ago. The growth rate was the highest for the company since it began reporting the metric in 2016. According to Twitter, the drivers for the growth were “typical seasonal strength, ongoing product improvements, and global conversation related to the COVID-19 pandemic.”

In a blog post in early April, the user growth has been highlighted by the company.

The growth in the number of users however did not result in an increase in sales for the company which reported just a 3 per cent growth year on year during the quarter. One of the primary reasons for the slow growth in revenues was an industry-wide ad slump because of a scaling back by spending by advertisers. However some analysts also pointed out to the incapability of Twitter to develop the kinds of ad products that have enriched competitors including Google and Facebook Inc.

Twitter has primarily been able to attract brand marketing instead of the “direct response” ads which are much simpler to measure and which grow faster and have shown greater resilience amidst the coronavirus crisis so far, said the company’s Chief Financial Officer Ned Segal.

Improving its ad products “has been elevated to our top company priority,” the company said and added that at the top of its list are direct response ads. These marketing spots could “increase our addressable market, with more access to advertising demand that may be more resilient through an economic downturn,” Twitter said in a letter to shareholders.

(Adapted from LiveMint.com)



Categories: Creativity, Economy & Finance, Regulations & Legal, Strategy, Sustainability, Uncategorized

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