Twitter sees big Q1 coronavirus bump, predicts rocky future

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Jack Dorsey donates $1B to coronavirus pandemic relief.

Some businesses have seen an economy-defying boom as a result of the coronavirus pandemic. Netflix with its endless library of content and Zoom with its videoconferencing tools instantly come to mind. One that is less obvious is Twitter.

The social media platform is far different than the likes of Instagram and Snapchat. Rather than just connecting users with each other, it connects them to the world. As a result, uncertain consumers are flocking to it now more than ever.

Twitter just reported a huge uptick in daily active users for the first quarter of 2020. However, it predicts that a rocky future lies ahead.

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Welcome, Users

People sitting at home because of the pandemic are constantly refreshing their feeds to try and gain some new tidbit of information. In a time when mainstream media sources are more politically polarized than ever, Twitter has become a “reliable,” relatively unbiased source for news. While users should always be fact checking what they see online, those looking for breaking stories will find that Twitter is often the place to go.

That trait has helped the platform draw in a host of new users. It reports that, in the first quarter, it had 166 million daily active users. That data reflects a 24 percent increase year-over-year from the 134 million users it had at this time last year.

Twitter CEO Jack Dorsey weighed in on the data, saying, “For the first time in history, the whole world is focused on learning how to solve one global problem. People are turning to Twitter to stay informed, to share solutions and to ask for help and support one another, and we see it in the numbers.”

During the first quarter, Twitter pulled in $808 million. That figure also represents a year-over-year increase from 2019 of three percent. Perhaps more notably, it is significantly higher than the $776 million that analysts projected the company would make.

For the first quarter as a whole, Twitter beat analyst expectations by posting a loss of one cent per share rather than a projected loss of two cents.

Unsteady Ad Revenue

Of Twitter’s total income for the quarter, ad revenue accounts for $682 million. That shouldn’t come as a surprise to anyone as it is a social media platform first and foremost. It also brings in some revenue by collecting and sharing data with third-party vendors and through licensing deals.

Unfortunately, companies that rely on ad revenue are looking at a grim future. Thanks to the widespread economic disruption of the pandemic and the fact that consumers aren’t spending as much money on non-essentials, businesses are cutting back on ad spending. This has been a painful turn of events for companies like Google, Facebook, and Twitter.

The latter is already starting to feel the effects of the downturn. Twitter CFO Ned Segal told investors on a conference call that the company saw a sharp decrease in global ad revenue during the period of March 11 to 31. He notes that Twitter’s ad-based revenue dropped by 27 percent year-over-year.

That isn’t a good sign for the days to come.

Following the news on Thursday, Twitter saw its shares drop by as much as 9.5 percent. The stock would go on to recover a portion of those losses later in the day, ending at a cost of $28.68 per share.

Tempering Expectations, Trialing New Features

In light of recent events, Twitter is tempering its expectations for the second quarter of 2020—as are most businesses. It’s almost certain that the platform’s ad revenues will be significantly depressed in the first half of the quarter if not throughout the entire period.

Segal cautioned investors on Thursday, noting that the future is full of uncertainty. He says, “It’s hard right now to really, in such a dynamic environment, assess exactly how things will play out over the rest of the year.”

To that point, Twitter is taking some proactive steps to draw in new users. It’s also continuing to solidify its foundation and platform. Eventually, the pandemic will come to an end and companies will start spending money on ads again. When that day comes, Twitter wants to be ready.

Dorsey noted that the platform continues to try and make conversations and content more relevant. He says, “To me, this is the biggest unlock for what makes someone really see the potential of Twitter.”

He also noted that the company is testing out a new feature called “fleets”—tweets that disappear after 24 hours. Users also can’t like, retweet, or reply to them. While that sounds like the exact opposite of what Twitter is, fleets have supposedly been receiving a positive response in Brazil where they are currently being tested. In light of the success, Dorsey said that Twitter hopes to roll out the feature globally as soon as possible.

Much-Needed Upgrades

On the technical side, Twitter is working on several upgrades to its infrastructure—both digital and physical—that will allow it to better serve customers and users.

The biggest one the planning of a new data center. This will help Twitter meet the demand of its growing user base. Unfortunately, the plan may be delayed due to a lack of hardware components related to the pandemic.

Meanwhile, it is working on a rebuild of its ad server system. The project began in 2019 and is reportedly nearing completion. Segal noted that it is scheduled to be finished in the latter half of the second quarter. The overhaul will allow Twitter to be more responsive to the shifting needs of advertisers. In a post-coronavirus world that will be more important than ever.

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