Q3 2020 Twitter Inc Earnings Call
[music].
Good day, ladies and gentlemen, and box.
But third quarter catching funny earnings conference call at this.
This time all participants are in a holistic only mode. Later, we will conduct a question and answer session and instructions will follow at that time I would now like to turn the call over to your host Kris.
That's a journey director Investor Relations. Please go ahead.
Hi, everyone and thanks for joining our Q3 earnings conference call, we have Jack and that's with us today.
We published our shareholder letter on our Investor Relations Web site and that the FCC about an hour ago I hope everyone had a chance to read it.
We will keep our opening remarks brief so that we can dive right into your questions.
As a reminder, we will take questions asked on Twitter, because we treat us at Twitter IR using the cash tag Tw TR.
During this call we will make forward looking statements, including statements about our business outlook and strategy.
These comments are based on our predictions and expectations as of today.
Our actual results could differ materially due to a number of risks and uncertainties, including the risk factors in our most recent 10-Q and upcoming 10-Q to be filed with the FTC.
Also during this call we will discuss certain non-GAAP financial measures, we've reconciled those to the most directly comparable GAAP financial measures in our shareholder letter.
These non-GAAP measures are not intended to be a substitute for our GAAP results.
And finally, this call and its entirety being bet cast <unk> Investor Relations website, an audio replay will be available on Twitter and on the website in a few hours.
And with that I'd like to turn it over to Jack.
Hi, everyone. Thank you for joining us we realize there's a ton of companies reporting today in Europe, probably pretty crazy busy. So we want to optimize their time around your question you said that it's going to quickly cover a number of the key points remark or shareholder letter and then we'll book in your questions Matt.
Thanks, Jack Good afternoon, everyone. As you can see from our results are hard work positions Twitter to deliver significant revenue improvement in Q3.
We saw strength throughout the quarter as advertisers around the world significantly increase our investment on Twitter seeking to engage our much larger audience around the turn of events and increased or delayed product launches. Our revenue product improvements are driving better ROI as businesses accelerate their digital spend and the online delivery of products and services.
Because the last three weeks of Q3 AD revenue was up 19% year over year, that's fairly consistent daily growth rates during that period, that's a significant improvement from the 15% year over year decrease that we saw in the last two weeks of Q2, perhaps a good demonstration of how we can perform when so many events and product launches the all of which the.
Typically fall in that window are driving more people and advertisers to Twitter.
As you know we made revenue durability, our highest priority this year and we're beginning to see the early results.
The AD server rebuild complete we're moving faster and delivering more we made progress on our brand and direct response products in Q3 with updated AD formats improved measurement and better prediction.
We also continue to elaborate on our revamped map offering and I decided to delay general availability. Its a 2021, when we can integrate expected new industry standard mobile privacy requirements.
Audience engagement trends were also positive in Q3 there.
There are 42 million more and do you then there were at this time last year remember, we saw a tremendous spike towards the tail end of Q1 two to <unk>.
Ongoing impacts from product improvements have allowed us to retain more of those new and reactivated accounts than we have in previous periods, resulting in 29% year over year increase in India. You in Q3, which is up 1 million sequentially to.
To see such a big surge in March and to deliver value to these people on a daily basis, such that we are retaining a better gives us increased confidence in our consumer product efforts and that our roadmap.
I want to thank everyone at Twitter for their incredible dedication resilience, we continue to see the value of our service the incredible potential of our business and the importance of our purpose to serve the public conversation final.
Finally, as I'm sure you all saw we announced our analyst day to be held on February 25, 2021. This is our first analyst day in many years and we look forward to discussing our work in more detail don't worry it will all be virtual with that we're ready to take your questions.
At this time, if anybody would like to ask a question. Please press star one on your telephone keypad again that is star one on your telephone keypad. Your first question comes from Lloyd Walmsley from Deutsche Bank. Your line is open.
Hi, Thanks for taking the question two if I can.
First thanks for some of the interesting data on direct response in the shareholder letter I guess stepping back as we kind of look to your ambitions with map and direct response.
More broadly can you talk about.
I guess the decision on the delayed rollout and then just why you guys think you in a better position to execute now on on.
GAAP NDR versus how you guys attacked it previously.
And then I guess the second one would just be.
Yes.
Can you give us any sense of how much of the strength in the quarter may have come from.
The boycott elsewhere.
And it sounds like from your commentary you feel pretty good about the outlook absent the election, and other kind of idiosyncrasies with the holiday but.
Any sense for how much of that is perhaps the boycott or what how much spending is coming from new versus existing advertisers.
Great. Thanks, Lloyd I'll kick it off so.
When we think about the work we've been doing on our direct response.
Road map, it's important to step back and understand how important it is D.R. is the larger and faster growing part of the digital advertising Tam and although we've got website clicks and app install ads today and that actually grew faster this quarter than overall ad and albeit against easier comps, but we know that there is work for us to.
Due to move all the way down the funnel to give advertisers.
Some regional customers and sell something to them on Twitter and we want to stay focused on getting all the way through that wrote back overtime.
We think about the opportunities for Twitter.
Remember we've talked in the past a bunch about where we feel like there's a lot of signal that we historically haven't leveraged that we have opportunity to put to use for the benefit of people on Twitter and for advertisers you'll notice that we've read prompted people over the summer to help them understand the benefits of personalization. The onboarding flows different than it has been historically.
To help people understand the benefits of it and some of the changes coming to the industry may very well layer leveled the playing field around personalization and the way the device I'd get to be used on iOS devices.
In.
An apple will set out early in the year.
When I answer the second part of your question on how much of the strength came from other things, it's hard to unpack different components of our strength from Q3, when we step back from it we think larger audience better revenue products.
Since and product launches that brought people in advertisers use Twitter, but also I think to your point the decisions that we make how we make them. How we communicate that we think are making it easier and easier for advertisers to choose Twitter with their next dollar than to put it somewhere else.
All right. Thank you.
Thank you next question please.
Your next question will come from attack and lets from JP Morgan Your line is open.
Thanks for taking the questions.
I'm really good about the work that we finish there and how we can benefit from it in two different ways. The first is that we're able to.
Bring the people who are working on some of that and.
To other teams. An example is the small and medium sized business work that we've long talked about but haven't been able to prioritize yet and we know people working on the opportunity to help small businesses Ah reach their customers in a more compelling way on Twitter then we have historically a second is that we're just able to test more things at the same time.
And moved faster as results routines don't need to ask other teams to pause in order to see there.
Go through.
There were able to continue to attract and retain great engineers, because they're able to work on new technology.
Okay.
And came next question.
Your next question will come from Brian <unk> from Morgan Stanley. Your line is open.
Thanks for taking my question question, maybe about the maybe it's related to add several members of sort of in a bigger picture can you talk to us about sort of areas of low hanging fruit improvements that you see from our data captured perspective, you know talk to us about what's changed and the data that you capture about your users that you think is potentially helping.
Overall targeting and what areas you still think you could improve from a data capturing analytic perspective to really driving better targeting of the ad units.
Hey, Brian I'll kick it often Jack may add some thoughts there is if it gets a little bit into consumer products and where some of the work. We've done there can help us around.
So we've long said that there is a signal that we're not leveraging the way that we can it couldn't be that somebody is in a in a dent our topic specific timeline and we can show them and add that's relevant to that event that we may not have known enough about to do that if they were in their home timeline or we may.
Not have been able to help the advertiser understand that this is a great place to reach their customer because we didn't have the.
The event specific timeline and we didn't have 70 million accounts following a topic.
<unk> pointed them to those timelines. So we feel like there is a.
A lot.
Historically, just haven't use that has been there and then there's also a more signal that we have access to today because of re prompting people to help them understand the benefit of personalization because of the way that the onboarding flow works now where people understand the benefits of it with more people, who can see personalized as so just asthma.
Data available to us and that helps us refine our models and find similarities so that we can show compelling as the People's though Jack not sure. If there's anything you want to add.
Yeah I think.
The most exciting work that we there were we're seeing is there on topics and interest in many of you have probably seen.
Prompts in your home timeline to follow some interest now because we're getting better and better recommending things that are going to be relevant to more people.
Ned said, we saw 70 million accounts, followed topics, which is a 40% quarter over quarter and we now have over 5000 topics and interest which is over which is up 25% quarter over quarter.
All this gives us much stronger signal because it's much more direct intent.
So not only does it help the the the.
Experience for the for the individual but also it should give a stronger signal into our business as well, but provides a greater surface area.
For us to really improve so much about are offering.
Great. Thank you both.
Thank you next question.
Your next question will come from Richard Greenfield from like check your line is open.
Hi, Thanks for taking my question.
Really I guess for both of you, but it's probably more on the product site for Jack.
36 million D. I used in the U S. It's great that obviously, you're up from 26 million. So it's hard to equivalent with the growth that you've seen over the last couple of years in U S. M. D. I use, but you know 36 million and I hate to put you in the bucket of comparing you to Facebook or Snapchat or report to others, but.
It it is sort of crazy that there's over 300 million Americans and you're at 36 million deal users I'm sure that.
Do you use versus M. A uses probably still less than half.
I guess kind of just the high level question of like what do you need to do to get to 50 to 100 million M. D. A to use in the U S. Like is it product changes is it education of consumers like how do you close that gap cause it just seems like there's so many people that touch your service on a monthly basis, but don't use it every day and obviously.
It won't feed into a larger revenue opportunity, but I'm just curious like how you get that does use growth and I know I'm complaining and you're up 29% year over year, but it still seems like that U S number is still a small.
Yeah, I mean, I I think there's a there's a number of opportunities there were focused on but I would point back to our work on topics of interest and I think we would have an opportunity to show people.
A much broader aspect of Twitter, then just what they see with news and politics.
One of the things that you know.
We're excited about and that we we saw.
During the Covid corn teens and also during the election is neither we do have topics to follow people are coming for one reason and spaying because they find relevant topics that are that are interesting to them.
As we continue to expand those as we continue to prompt those earlier and the experienced such as Onboarding.
I think that helps us dramatically.
And I think it just further shows like all the conversations that are possible on Twitter. So it's really a question of like how do we show more of the breath, how do we get people to very niche interest in topics, which tend to do extremely well.
And how do we bring it earlier in the in the customer experience.
Can you give us any sense of how many people actually have used topics since you've rolled it out I know it's still early.
I think that 70 numbers a good thing to point you to risk that 70 million accounts I've taken the time to follow a topic.
When we are still.
I'm, making the experience of finding topics diner.
Better and better when we're still making the topic's better and better both the quantity of them and then the quality of the tweets that you see so for example today.
There are 65 cash tags that one can follow those really going out there just a couple of months ago, and we're watching how people interact with those the dollar sign ticker.
So that we can make the transition better on those 65 and roll it out some more if you and I both follow a topic like NFL, because we have different followed grass, we'd probably see different things because we follow the topic with you on the East Coast and me on the West Coast and so these are great. Examples.
We will have to refine the niners stuff.
[laughter] well.
Slowly early of our football agencies out of it but I do think that there is.
That there's a lot of opportunity and those are great. Examples of what we can do to take that number if you take out of work from 50 to 70 million in 90 days the opportunities to use this is a great way to help people see all the great things on Twitter about athletes do the hard work to find the accounts.
Because I just know so many people are focused on <unk> is there any way to tie the people that use topics do they spend more time can you prove they engage more regularly with Twitter when that number like that 50 to 70 has led to those people being more active on the service on a daily basis.
So this is something you want to watch for awhile before you.
Really good about it but our sense is that topics are additive to the experienced some sweater and there are lots of different ways to measure that it's not just about how much time people spend.
Because of topics work well it may mean that people spend less time on Twitter because they have a better experience finding what they're looking for they're going to be really careful that we're solving for the right things.
Can we do this but our sense of the topics really do help people have a better experience on Twitter.
Thank you.
Thank you next question please.
Your next question comes from Ross Sandler from Barclays. Your line is open.
Hey, guys. Great. This is deepak rosoff since a couple of questions. The first question was the 19% growth in the last three months that three weeks is pretty strong, but how do you see things kind of play out with fewer big sports events. In for you do you think there is a possibility to move some momentum from just having an <unk> for the most part of our.
Is the record, Oregon, Brian advertising like me to continue to gain steam and the second question somewhat related covid related uncertainties does to sit in many markets are.
Actually getting worse.
Clearly there was there was the impact on that budget were pretty significant in late.
Late <unk> and early two Q, but do you think there is the opportunity for correlation and I spend a covid can't continue to get worse.
Thanks, Deepak good questions. So first let me talk about the fourth quarter.
Remember, we were up 19% year over year and ads in the last three weeks of Q3 and.
And we grew our AD revenue, 44% sequentially in the third quarter, we have fairly consistent daily growth rates during that last three weeks of the quarter, which gives you a sense for how we can operate and deliver for advertisers when events and topics or coming back when we got a larger audience and when we're making it easy for advertisers to put.
Their next dollar to work on Twitter as opposed to somewhere else. Let me just talk about Q4 were remember October looks a lot like September in terms of events coming back and things that are sometimes delayed from previous periods.
Product launches coming back some of which were delayed and others, which were planned but where you've also got the secular shift or more of it is happening online both the advertising because of what's happened about moving a T V and because people aren't in stadiums and the delivery of goods and services and so all of that I think plays outside our benefit in.
I think is by October has a similar setup as September November is a little harder to predict because of the election, but I think what we learned in November around the block buys matter movement in the United States is that when you advertisers do choose to pause a slowdown because there's a more important discussion happening on our service.
When they come back they often spend through that budget that they had set aside for Twitter because their objectives.
Their reach goals haven't changed and then you've got December where you've got are probably a.
Holiday buying season that could play out earlier and different and more digital than they have in the past, which also hopefully creates a good setup for Twitter as well so we'll work hard to deliver against all those opportunities recognizing that.
November is a little harder to predict and the other periods are in the second part of your question around Covid that we want to focus on the things that we can control and what we can do around covid into that extent people final sells them or economists.
Closing down a little more is we want to make sure that people can find what they're looking for on Twitter, whether it's around covid or something else. We want to continue our focus on topics and health because when we do that just like that group of people that came to us in March when the world buses went to shelter in place. We proved that we can retain that cohort better than we had previous ones and so we feel.
About that as an indicator of what we might be able to do.
Things play out.
In the future where are you unfortunate situation, where economies are shutting down again and in terms of advertisers settlement big advertisers have learned a lot since March.
They've thought about how they want to show up and adapt quickly to this environment and there are a lot of things about the fourth quarter that are really important to them and we expect them to continue to show up through any environment, but the way that they choose to do that and exactly how they do I think I lost the weight.
Got it no that's very helpful. Thank you so much.
And the next question.
Your next question comes from Michael Levine from Kevin It'll be sure. It's your line is open.
Greed revenue quarter, guys question to re specifically around sports I know you talked about it in the letter and I mean people have certainly been looking at the at the ratings declines.
I mean are there lessons that you're learning from engaging with these advertisers that as you look into 21 and beyond like or.
Is it changing just the way they're thinking about you. So even if let's say we have normal fee and people are back in the stands next year like is that something you think about some of calm perspective or do you just feel like the perception of Twitter as an AD platform is just going to be different as a result of this.
Thanks, Michael I do think that perception is different on many levels and much larger audience.
Improves revenue products, but also the innovation that we partnered with a lot of these content partners to come up with reference to Showtime Cam for the NFL and the fact that they're seeing more views.
Video on Twitter than on any other platform or the way we worked with major league baseball to get happenings of playoff games on the service through Fox. So that they could have a lead in to get people to go watch it somewhere else. These are things that people come to Twitter for and where we were a car.
But these partners to differentiate ourselves given the public conversation that happens on the service and I don't.
The innovation May change from one period to another but the partnership doesn't nor did a secular shifts to people buying more things online and advertising more online because because they wanted to meet our customers. When they are whether they're on their sofa or they are able to get back to our stadium ardrossan.
Thank you and we will take our next question from Twitter come to my account at roaming Rubenstein.
And $2 billion repurchase program has not been initiated as a Q3 due to call the disruption and uncertainty yet you admit that.
Considerations have eat doesn't this uncertainty represent a better opportunity to buyback undervalued shared now rather than in the future when Twitter is higher.
Thanks for the question Roman So we think about a lot of factors when it comes to capital allocation and went to begin that share repurchase and as you noted in the letter we talked about how we have not purchased any shares yet and that the reason.
Principal reason for that has been that there's been a lot of uncertainty in a broader environment around us and we want to make sure that we have the capital to continue to grow our team and invest in our business through any environment, whether that's through continuing to bring technology in town for the company through acquisition or through investing in.
Servers for our new data center or other things.
You also pointed out one thing we said letter which is that many of these consideration that it caused us to not repurchase shares yet have eased when we think about buying back our stock we consider our share price, we consider our capital structure and what the right amount of cash is Devin the balance sheet. When we think about our needs over time, we think about the dilution from share issuance to employees and.
A handful of other things and when we do that it just has made sense to.
Start to buy that yet in our plan is to talk and a quarter. After we began our share repurchase you'll hear about it on earliest call in a letter and in the filings and.
Just keep you posted as we go.
Thank you Nag next question please.
X question customer hates Kerry from Goldman Sachs. Your line is open.
Great. Thank you. So we look at the at the sequential broken MBA use this quarter I was wondering if you could kind of help us.
Maybe disaggregate some of the moving parts lake within that.
Are there any an impact this quarter from.
Information quality efforts or or sort of similar initiatives that you've taken in the past that have that have been back.
User growth was there sort of fluctuation country to country that.
You would point out beds that sort of work considering when we look at the number that relatively flat, but I'm guessing probably has a lot of movement any of the surface.
Thanks, <unk>, let me first grabbed him the numbers.
Since I know, there's a lot going on this afternoon. So.
<unk> was 187 of 29%.
It was broad based but double digit growth and all of our top 10 markets.
20% a year over year in.
States and 32% internationally.
Remember, we saw a huge surge an audience towards the end of Q1 due to covid and that was a lot of new and reactivated accounts as much as we would all like to see that happen every quarter and Navy. What some of you have had modeled.
It also it may not be how things play out as a pretty unique time in the world is a great news is that we're doing a better job of retaining those new and reactivated accounts due to the ongoing product is brute instead Jack went through earlier.
On the sequential increase.
As I said, we'd all like to have that kind of search all the time, but it's just not going to happen every quarter. We continue to have a healthy top a funnel in the third quarter.
We're pleased with the bass that we're getting and the conversation around the pandemic around topics and events around politics and other things come and go. These numbers are going to vary but we remain focused on the learning invalidation of our strategy that demonstrated by that better retention of that group that came to us in March let's talk about queue for for a second to this as well.
We look ahead.
The fourth quarters, typically seasonally slower for us in terms of it and do you.
Remember with the increased activity around the U S election, which does not happen.
Then a midterm is.
And you think about all the great product work that we've done.
To make sure that we can help people when they do come to Twitter and we feel like those are things that have the potential to benefit us in terms of MDA egos in Q4 and beyond.
Great. Thanks, Matt.
Thank you next question please.
Your next question comes from.
<unk> from Jeffrey sure line is open.
Great. This is James.
Could you comment a little bit more on the map product delay and specifically when in 2021, you anticipate making that more widely available you think it's more of a first half of 21 or second half story.
And then I guess more specifically do you think it would have a material impact on revenue growth next year is it is kind of.
Something to look out maybe a couple of years.
And then my second is just around Q for holiday season kind of wondering how you think your position this year compared to last to capture advertiser demands.
And whether you think some of the improvements you've made on the on the product and infrastructure side.
Give you an advantage this Q4 compared to last thank you.
Thanks, James first on Nap. So remember we've decided to delay into 2021 for a couple of reasons. The first is a learning that we had from the pilots that we've done this year and that does work that way you still want to iterate on but the second is that Apple has delayed the idea of a changes that they're going to make the iowa's 14 into.
<unk>, one and we need to wait and hear from them the specifics and think about how we want to adjust.
And advertisers and other add platforms and others are on the ecosystem will have to do the same and so it's too early to predict what we hear from them, how we choose to react to it how the rest of the ecosystem does but that'll be a key component of how this all plays out I do want to take a step back on math and remind you that although we will have to wait until next year for the.
A revamped version of the product we continue to make improvements consistently here that we feel really good about I want to call. It a couple of them one is that.
Remember, we took away third party measurement in the third quarter of last year for map advertisers, we know hundreds of advertisers who have it and with third party measurement, they're spending 30% more so we're not waiting for this fully Vega aversion to rollout important features.
We are doing.
Doing other improvements such as the carousel data that we've got that map format.
And some other things that we feel really good about underneath the surface that are driving results around math and causing advertisers to.
Still invest more with us while we're waiting for that revenge.
Product to come out some time next year. Your second question around Q4 and.
Uhm the work we've done we feel really good about the work we've done to help advertisers deliver in what should be any.
Q for holiday season, unlike others that we've seen historically and.
Let's do a little bit in detail earlier, but I know, there's a lot going on today, although I won't I won't be able to point here.
Great. Thanks Man.
Thank you your next question.
And the next question will come from Mark small like Conference T. Your line is open.
Yes, hi, thanks for taking my question.
The the new AD server sounds like there's some excitement from the engineering side as we think ahead towards kind of the revenue product roadmap is there any incremental color you can share on what other types of a new revenue products. You guys are thinking through any kind of the pacer cadence of when some of those might come into beta or online. Thank you.
Thanks So.
Re I continue to think through and work on some non AD revenue opportunities, which are an important part of our revenue durability objected, which is Interblend company priority, there's nothing new to report today.
You will see tests from us and if you all picked up that we've got a job posting for an engineer that was going to work unless I suspect you'll find the tests when they happen as well this isn't something that I think about in terms of revenue for this year, but it is stuff that you're going to see us working on an experiment with things both for businesses and for <unk>.
Tumors, where we can improve their experience on Twitter and where we think there's a subscription opportunity for us commerce. There's another opportunity that we're excited about where you'll see more from us overtime and there'll be others for us to talk about as well, but we want to get further down the path to <unk> prepare to talk more about photography.
Thinking next question please.
Your next question comes from casting Patterson from Keybanc. Your line is open.
Great. Thank you very much another one on sports you've spoken in the past about being the bird virtual stadium based on your early learning from the Spirit. How do you think about iterating on the product to drive user growth engagement and can people will be captured some of the more offline advertising dollars typically associated with those channels. Thanks, so much.
Hey, Justin we think the work that we've been doing.
Has been a big reason why we've been able to capture some of those dollars that move away from linear television when Ah there are highlights when their interactions with players and other participants around sports on Twitter.
Things have been great opportunities for us with all the leaks as they come back and look for way to engage their fans, but it's also true for movie launches, where you see what's parties on Twitter for when a new series starts on an over the top video service and they do I'll Watch party. These are both engagement opportunities for us to bring in <unk>.
Audience, together that otherwise wouldn't be able to interact.
They are opportunities for our content partners and their significant advertising opportunities as well a lot of these things both have pre role in front of them, but they also create opportunities around the timeline around the specific events aware of when we know more about what somebody cares about when advertisers have the opportunity to connect directly with that customer arrau.
<unk> on events or topic, that's being in to Twitter, how those are terrific advertising opportunities as well.
Great. Thank you and we'll take the next question container. It comes from the account at Twitter Womack. The question is can you speak to the trends and add spend that you have observed thus far in October is it a continuation of September.
Or any noticeable increases or decreases.
Hi, Thanks for the question, we're really here to talk about the results from the third quarter as opposed to the month of October, but if I'll be back to some comments in the letter what we showed up from the set up for October feels a lot like like.
Like September on the surface. When you remember that there are lots of events some of which normally happen in different period.
When you remember that we've got a much larger audience and yet there are more product launches some of which also a ventilation previous periods that happen in October relative to other than a year ago period or two previous month's.
In 2020 and so.
Just point you to.
Those comments on what we said in a letter also that.
That plus 19% adds growth that we saw in September outside of the election period, we've seen a reason why that trend can't continue or even improve.
Thank you <unk> and there's no one out that we can see in the queue now I will turn it back over to you to close.
Okay. Thanks, Christa and thank you all for joining US. We appreciate your interest in sweater. We look forward to speaking with you next quarter. When we report earnings which will be on February 9th until then we'll see you on Twitter.
Ladies and gentlemen, thank you for participating in today's program. This concludes the program email disconnect have a good day everyone.
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