Twitter Generated $808 Million From Ads in Q3 2020 Despite Slow Growth in Monetizable Daily Active Users

Twitter has shared its Q3 earnings report which outperformed analysts’ expectations in terms of revenue and earnings per share. The company saw an increase in the total revenue earned over the last quarter.

Revenue generated from advertisements totalled $808 million which is a 15% increase from the $702 million that was generated in Q3 2019. Ned Segal, Twitter’s Chief Financial Officer attributes this to the increased investment of advertisers on Twitter.

He said, “Advertisers significantly increased their investment on Twitter in Q3, engaging our larger audience around the return of events as well as increased and previously delayed product launches.”

Compared to the previous quarter of $561 million, the ad-generated revenue grew by 44%.

The bulk of the advertisement revenue for the quarter came from the United States. $422 million was generated from the US while the remaining $380 was generated internationally. This means that the US is still Twitter’s largest market in terms of advertisements, with over 50% of revenue coming from there alone.

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Besides the advertising revenue, $127 million was generated from data licensing and other sources, bringing the total revenue reported by Twitter to $936 million for Q3.

Financial market data provider, Refinitiv predicted that Twitter would record $777 million. The $936 revenue generated, however, outperforms Refinitiv’s prediction.

Net income drops

As the revenue increased for the quarter, the costs and expenses incurred by Twitter also increased. $880 million was spent on costs and expenses, which is a 13% increase from the $779 million that was spent in the same quarter in 2019.

This puts the operating income at $56 million and gave the company a 6% operating margin, a slight increase from the 5% margin in Q3 2019.

The net income for the company is $29 million and is a steep fall from the $37 million that was recorded in the previous year.

Number of monetizable users not growing fast enough

Despite the growth in revenue, Twitter did not record an impressive-enough increase in the number of users that could be monetized. Analysts from FactSet had expected the number of monetizable daily active users (mDAUs) to rise to 195 million over the Q3 but Twitter only recorded 187 million.

This is a slight increase of 1 million from its Q2 report of 186 million mDAUs. Compared to the number from Q3 2019, Twitter’s mDAUs grew by 29% year over year.

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In the US, the mDAUs did not increase from the 36 million recorded in Q2 2020 while the monetizable users from other parts of the world increased by 1% from 150 million in Q2 2020 to 152 million in the Q3. This brings the total number of mDAUS to 187 million (the difference in net figures is as a result of rounding up of numbers).

Twitter’s shares went down about 15%in after-market trading after its report delivered less than expected on the mDAUs.

The company says more people engaged with its ads in Q3, with total ad engagement growing by 27% year over year compared to Q3 2019. It warned that the advertiser behaviour is “hard to predict” because of the upcoming US elections but says it sees no reason why “September’s revenue trends can’t continue.”