Twitter Inc (TWTR)

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Twitter Just Shared Some Very Notable Things in the Last 24 Hours
By: TheStreet | July 23, 2020

• Twitter confirmed it's exploring subscriptions and other non-advertising revenue streams, and also admitted that direct messages were exposed in its recent hack.

Between its shareholder letter, its earnings call and tweets discussing its recent hack, Twitter has made a number of interesting disclosures over the last 24 hours.

Twitter’s (TWTR) stock is currently up close to 4% in Thursday trading -- in spite of a 2.4% Nasdaq drop -- after the company posted its Q2 report. Though Twitter missed Q2 sales and EPS estimates amid a 23% annual drop in ad revenue, markets are pleased that the company’s average monetizable daily active users (mDAUs) grew 34% annually to 186 million, an acceleration from Q1’s 24% growth that was aided by lockdowns and civil unrest.

In addition to its sales, EPS and mDAU numbers, Twitter shared a few other things of interest -- some positive, some negative -- since Wednesday evening. Among them:

1. Twitter Is ‘Exploring’ New Revenue Streams Such as Subscriptions

“We are...in the early stages of exploring additional potential revenue product opportunities to complement our advertising business,” said Twitter in its Q2 shareholder letter. “These may include subscriptions and other approaches, and although our exploration is very early and we do not expect any revenue attributable to these opportunities in 2020, you may see tests or hear us talk more about them as our work progresses.”

The remarks arrive two weeks after Twitter’s stock jumped following the discovery of a job posting that suggested the company is working on a subscription platform, albeit without sharing many specifics. On Twitter’s call, CEO Jack Dorsey offered a few more details about how Twitter is thinking about a potential expansion into subscriptions and other non-advertising revenue streams.

“[First] and foremost, we have a really high bar for when we would ask consumers to pay for aspects of Twitter. And this is a start, and we're in the very, very early phases of exploring,” he said. “We do think there is a world where subscription is complementary. We think there's a world where commerce is complementary. You can imagine work around helping people manage payrolls as well that we believe is complementary.”

Dorsey qualified his remarks by saying that Twitter's biggest near-term priority for revenue-generating offerings remains the overhaul of its mobile app advertising solution, which has been a clear weak spot in recent quarters for its ad business.

2. Ad Sales Were Still Slumping as of the End of Q2

“During the last three weeks of June, advertising revenue declined 15% year over year,” wrote Twitter in its shareholder letter. While that’s better than the entire quarter’s 23% drop, as well as the 27% drop Twitter saw from March 11 to March 31, it does suggest Twitter’s ad business continues to meaningfully underperform those of social media peers, in spite of strong mDAU growth.

Facebook (FB), whose Q2 report arrives in six days, disclosed in its April 29 Q1 report that its ad revenue was roughly flat on an annual basis during the first three weeks of April. And on Tuesday, Snap (SNAP) disclosed that its revenue, which consists almost entirely of ads, rose 17% annually in Q2 and -- while cautioning that it expects growth to cool -- was estimated to be up 32% in Q3 as of July 19.

When asked on Twitter’s call whether ad sales growth had improved in July relative to the last three weeks of June, CFO Ned Segal declined to say whether it had. He did say, however, that Twitter is optimistic that the return of live sports will boost its ad sales.

3. Direct Messages Were Exposed in Twitter’s Recent Hack

On Wednesday evening, the Twitter Support account said that it believes up to 36 of the 130 high-profile accounts that were targeted in last week’s hack had their Direct Message inboxes exposed, including that of Dutch politician Geert Wilders. Twitter added that it has “no indication that any other former or current elected official had their DMs accessed.”

Twitter also noted that 8 non-verified accounts had archives of their Twitter data (accessible through a feature called “Your Twitter Data”) downloaded. The disclosures follow a recent New York Times report that indicated the hackers were able to commandeer admin tools that let them control prominent Twitter accounts due to the posting of login credentials on one of Twitter’s Slack messaging channels.

4. Twitter Is Seeing Strong Uptake for Its ‘Topics’ Feature

More than 50 million Twitter accounts have begun using the company’s Topics feature, Dorsey disclosed on the call. Topics, which was unveiled last November, surfaces tweets related to subjects a user has chosen to follow (for example, sports teams, technology trends or political events) on his or her Timeline.

Dorsey also noted that users are now able to follow more than 4,000 topics. Segal later added Twitter, whose content-discovery features have often drawn criticism, is “experimenting” with integrating both Topics and Twitter’s lists feature with its onboarding process for new users.

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