Twitter Ads Revenue Falls by $25M in Q1 2021 as Growth in Monetisable Users Fail to Drive Earnings

Twitter saw its Q1 earnings from paid advertisements fall by $25 million in its latest quarterly report for the three months ended March 31, 2021.

The social networking giant realised $899 million ads revenue in Q1, up by 32% year-on-year (YoY). However, its ads income represented a 22% decline compared to the $1.15 billion posted in the preceding quarter (Q4 2020).

Overall revenue took a slight hit in Q1, falling by 19% to $1.04 billion. The United States remains Twitter’s biggest market, raking in revenue of $556 million, 53% of the company’s total earnings in the latest quarter.

Ads Revenue Drops Despite User Growth

A 4% increase in Twitter’s monetizable daily active users (mDAUs) failed to shoot up income generated from ads in Q1. Twitter added 7 million new mDAUs as daily active users grew by 20% YoY to reach 199 million.

Twitter’s launch of new products including its live audio chat rooms, Spaces as well as Super Follows drove higher engagements which saw the platform gain more users. But this did not translate to higher ads revenue in Q1.

The decline in overall revenue despite the growth in mDAUs can be attributed to both a decline in ads revenue and increased operational costs which totalled $984 million, a 21% increase YoY.

Higher Q1 costs and expenses cut down operating income to $52 million, a steep 79% plunge from the $252 million recorded in Q4 2020.

Read: Twitter Expenses Grew 19% to $3.69bn in 2020 due to COVID-19 Disruptions

Although ads revenue increased by 32% YoY, its contribution to overall revenue reduced in Q1. Ads earning accounted for 86% of total revenue, lower than the 89% in the previous quarter.

Net Profit Falls by 69%

Twitter posted a net profit of $68 million in Q1, a massive 69% drop from the $222 million earned in the previous quarter.

At $68 million, net profit for Q1 was less than one-third of the profit realised in Q4 2020.

Lower ads revenue and higher expenses impacted the group’s profitability in the first quarter of 2021. However, Twitter’s Q1 profit is a marked improvement from last year’s performance when it reported a loss of $8.4 million.

Going forward, Twitter is maintaining a positive outlook for Q2 2021, and expects revenue growth to pick up steam.

“We continue to expect total revenue to grow faster than expenses in 2021, assuming the global pandemic continues to improve and that we see modest impact from the rollout of changes associated with iOS 14.5. How much faster will depend on various factors, including our execution on our direct response roadmap and macroeconomic factors,” the company said in a statement.