Q4 2020 Twitter Inc Earnings Call

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[music].

Good day, ladies and gentlemen, and welcome to the Twitter fourth quarter 2020 earnings Conference call. At this time all participants are in a listen only mode. Later, we will conduct the question and answer session and instructions will follow at that time.

I'd like to turn the call over to Chris that that's true.

VP Investor Relations. Please go ahead.

Thank you hi, everyone and thanks for joining our Q4 earnings conference call.

We have Jack and not with us today.

We published our shareholder letter on the Investor Relations website.

And with the OCC about two hours ago.

And hope everyone had a chance to read it well.

We'll keep our opening remarks brief so that we can dive right into your questions.

As a reminder, we will also take questions asked on Twitter. So please.

Treat us at Twitter IR, using the cash tag TWD TR.

During the call will also make forward looking statements, including statements about our business outlook strategy and long term goals.

These comments are based on our plans predictions and expectations as of today, which may change over time.

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 the upcoming 10-K to be filed with the SEC.

Also joining the call who will discuss certain non-GAAP financial measures.

We have 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 in its entirety is being webcast from our Investor Relations website, and an audio replay will be available on Twitter and on our website in a few hours.

And with that I'm going to turn it over to Jack.

Thanks, Chris Good afternoon, everyone and thanks for joining us for a few comments from me before we get to your questions.

I'm really proud of how we navigate the 2020 and a remarkable finish in Q4.

We reported revenue of $1 3 billion of 28% year over year, reflecting great progress across both brand and direct response.

31% year over year of growth in total AD revenue and greater than 50% of year over year growth in the.

<unk> revenue in Q4.

We made significant progress with new AD formats stronger attribution and improved targeting in Q4.

And that momentum continues in Q1 with the launch of our rebuilt map offering and website clicks objectives.

These improvements allow us to share of Dr. Advertisers of all sizes with better performance.

Puts us in a much stronger position of drive accelerating revenue growth from 2021 and beyond.

Average of all possible <unk> reached the $192 million in Q4 of 27% year over year with growth from product improvements, reaching an all time high in 2020.

Looking ahead, we have a strong product roadmap.

And to deliver even more daily utility from new and existing customers.

I'm also proud of the work we did in Q4 and over the course of the year to protect the integrity of the conversation around the U S elections scale.

Scale of our infrastructure.

And service.

And service operating reliability throughout the major of the events of 2020 and grower team for keeping people safe in the face of global pandemic.

With everything that's been happening in the world in the U S and on their service around the U S elections.

<unk> been getting a number of questions from you all about our audience.

We are of platform that is obviously much larger than anyone topic or anyone accounts.

80% of our audiences outside of the United States and we have more than 50 accounts with over 25 million followers.

The conversations on Twitter every day or based on what's happening in the world and we have proven in the past few years that if we do the work to serve the public conversation.

The daily audience gross.

Anticipating the question the increase in average absolute <unk> to the end of January was above the historical average from the last four years and.

And we expect to see MD of <unk> growth of approximately 20% year over year in Q1.

We look forward to seeing you all of our virtual analyst day on February 25, where we're going to go deeper on all of our plans.

And lastly, I want to thank our teams for their incredible resilience and dedication during these trying times.

We continue to see the strength and value of our service.

Credible potential of our business and the importance of our purpose to serve the public conversation.

Smith.

Thanks, Jack before we get into the Q&A I'd like to highlight a few topics.

As Jack noted Q4 was the strong finish to the year total revenue of $1 3 billion was our highest ever in the quarter. We grew total AD revenue of 43% sequentially on.

On a year over year basis U S. AD revenue was up 27% head of international AD revenue was up 35% compared to 11% and 20% respectively in Q3.

Advertiser demand was stronger than expected throughout the quarter outside of the short period bracketing. The U S elections on November 3rd.

Given the more stable business box backdrop, we were able to move faster and hiring resulting in total expense growth for Q4 of 21% and capex growth of 95% year over year.

As the result of our strong revenue performance, we reported our highest ever quarterly operating income of $252 million from <unk>.

Minder of the leveraging of our business when we deliver revenue strength like we did in Q4.

Based on our conviction in our strategy.

And the opportunity and execution and pace of innovation, we're maintaining our investment posture in 2021 and expect to grow total costs and expenses of 25% or more with most of our opex focused on head count, particularly in engineering and product were also modestly increasing our capex spend in 2021 to support the bigger.

Base of audience and advertising and to complete the build out of the new data center.

We're pleased with the steady progress, we're making in both brand and performance ads from Xbox Mexico, using the new map carousel to launch its next generation console the Yahoo.

Japan rebranding it as big of annual E Commerce campaign advertising and turning to Twitter for campaigns that drive awareness and deliver results. While still early we're also laying the foundation for more revenue from small and medium businesses as well as non advertising subscription based revenue streams that will experiment with this year and fee revenue from.

And the more meaningful way next year.

Assuming COVID-19 improves and we see modest impact from the rollout of changes associated with iOS 14, we expect revenue in 2021 to grow faster than expenses.

While we typically don't provide an outlet for MDA. You. This is an unusual year on a number of levels and we recognize our recent outsized growth will impact our growth rates from 2021 in a way that merits explanation.

There are no changes to the ambition, we shared pre pandemic when <unk> was at $152 million for us to grow MDA, you, 20% of our over multiple years, but the accelerated <unk> growth driven by Covid sets tougher comparables for most of the 2021.

We announced on March 20, <unk> of last year. The MDA you year over year growth was already 23% quarter to date.

And the mid March surge from Covid that sustained the rest of the year had an outsized impact on the last few quarters growth rates.

We expect <unk> growth of Jack had mentioned of about 20% in Q1, the due to the tougher comps, we expect quarterly growth rates in the low double digits on a year over year basis. In Q2, Q3, and Q4 was the low point likely in Q2.

We remain focused on delivering higher growth rates in years to come as we reset some of our normal comps.

<unk> also seen we announced our rebuilt map and website clicks product yesterday as well.

It's a great blog with more details on Twitter and on our website in summary, we're pleased with our results and the momentum we carry into 2021, and we're ready to take your questions operator.

Okay. Thank you ladies and gentlemen, if you have a question from time of please press Star then one on your Touchtone phone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.

First question comes from Doug Anmuth of Jpmorgan. Your line is open.

Great. Thanks for taking the questions one for Jack and then one for Ned Jack.

Jack was just hoping you could talk on the product side, a little bit about tweaks and engagement that you're seeing so far.

And just how you think that drives kind of the different user experience.

And kind of distribution of content and then similarly in spaces I know, it's early but there's clearly a lot going on in terms of.

The adoption in the audio conversation space, So just hoping to get some of your thoughts there and then Ned quickly.

Quickly a lot of AD innovation kind of coming together at once I'm curious, if you're seeing a lift in advertiser.

Thanks for the question.

We're looking we're looking more of the use cases in terms of of what serves both of the conversation both Kate.

For the best sort of thought on Twitter.

Suites.

After the use case of of from real content.

Sure. The we can provide a solution for people who may not wanted to of a tweet up permanently.

The more of the moment.

We have a long roadmap ahead for the future.

And the early results after Covid launch look good, but it's still pretty early.

Spaces is a really compelling area.

Really the globe.

What we're seeing early with our beta testers in terms of the audio conversations with the can have free flowing giving a lot more control to the participants.

It will present, a new model for how we think about <unk>.

Instantaneous.

Potentially the femoral communities.

In public conversation and there is another area of the three announced recently wishes around newsletters. This is really the long form used case.

Sure of that people can use Twitter not just for the short 280 character burst.

But also to expand on the thoughts we're just getting started there but you saw the integrated very quickly into our web service.

So with all three we have.

Some foundational use cases, the we'll we'll be watching very closely and learning from and Iterating quickly on but.

Generally the thing that ties all of these together are there are multiple multiple ways to have public conversation and we want to make sure that we have the best offering that not only is best of class for each individual use case, but more importantly, what makes us strong as how they connect together.

And.

Okay.

The tying them together is going to be just going to drive the most value to mind Mike.

Hey, Doug on the second part of your question around Advertiser count nothing where the share there today, but we were really proves of how the SMB segment.

Really resilient for us over the course of the year, we have added to the sales team. We've added to the product team that supports them. We know we need to do a better job, helping small and medium businesses understand why issue of advertising on Twitter find their customers on Twitter and make it easy for them to create their campaign.

And so the fact that we're doing so well that we know a bunch of that work is in front of us. It tells us that there's lots of opportunity to help the millions of small businesses on the service find their customers.

Put ads up on the service, but a lot of that work remains in front of us.

Great. Thank you Bill.

Your next question comes from Justin Post with Bank of America. Your line is open.

Great. Thank you a couple of in the newsletter, you talked about the growth from product initiatives being highest ever can you cash how you're measuring that and what has happened with churn rates does that does that help you in 'twenty, one and then definitely you see you're rolling out map.

Of some real interesting metrics in there.

What gives you the confidence to roll it out now I know you were saying on the last call you.

<unk> seen the results you would have wanted to see what kind of changed in the last three months. Thank you.

Thanks, Justin.

So.

Alright.

I'll kick it off and then if.

There's anything I missed.

Jack if you want to take the funds for the.

Just to give you a few numbers.

Level set remember that group of people, who joined us around the time that everybody went to shelter in place has retained better than historical crew cab that continues to be the case, we think of lot of the work that we've been doing whether its around topics or the.

The work to preserve the health of the conversation on the service have really helped people find what they're looking for central states staying there.

Number one.

And to think that.

The second part of your question was around map.

And why now so we have released over 30 improvements to that product over the last year.

And they've been things from improving our terms of service and working with third party measurement partners to releasing the carousel.

Format and improving the models that do prediction than you are.

Already seeing the early results from it such as the 80% plus impression growth that we're able to drive in Q4 and the over 50% growth in revenues from that in Q4, albeit off of the slightly depressed base in Q4 of 2019.

As we thought about how to balance all of these new features that we had in getting us into.

It was ready and at the time, they get the some people's hands recognizing that there always are going to the changes to which we need to adapt we've also already done a lot of the work to prepare for <unk>.

We announced the couple of things yesterday, the wine is called Twitter click <unk>, which will help you.

Attribute a click from Twitter to kind of an advertiser's website without of cooking as the world moves away from cookies overtime and we've also implemented GSK AD network, which is apples aggregated reporting service for advertisers to see what happens. So it felt like it was time to go on Mark and also on the revamped website clicks product, but there'll be lots of.

That will continue to come on both of those over time.

Great. Thank you.

Your next question comes from Rich Greenfield with the light shed partners. Your line is open.

Thanks for taking the question.

I think on the last conference call you, obviously scared a lot of investors with your commentary around sort of the delay in math.

You read your debt.

Gross debt that you just called out in terms of sort of all of the progress youre, making on performance advertising.

Yes.

Marketing, where does map fit in how much is kind of outside the bounds of math, because obviously when you talk about a doubling of revenue in Q4.

In terms of kind of kind of where you got to I think of lot of it gets lost in sort of the delay the tap into map.

So just kind of helping us understand what's in that mix would be really helpful.

Hey, Richard on direct response broadly, there's two big buckets for us.

They are not and website clicks and so we haven't quantified clicks in the past, but we did share more details on that today just to give everybody a sense of the size of it because I think we recognize that people may not see how big it is for US already of network building off of a strong foundation as we look to grow from here.

The business that was over $300 million last year that was roughly flat for the year, but the grew 50% in Q4 gives us the foundation to go out and help those advertisers, even better and to help new advertisers as they gain confidence in test and learn around the food built version of the product.

We've talked about the Dr roadmap.

So just as we've sat around other parts of our service that we've worked to improve over the years that we need to begin by fixing the foundation. So that started with the AD server.

It will lead to direct response work first with not the website clicks and will continue to move further and further down the funnel of that those two areas are the primary pieces of direct response for US today as we work to move further and further down the funnel.

And then just in terms of time debt that answer that you just gave to the answer before on the number of advertisers, obviously youre still dwarfed relative to someone like Facebook, which has 10 million advertisers now.

Like as you think about closing that gap, obviously, I would think everything youre doing for small businesses. It all ties into direct response and sort of the rebuild and sort of the work Youre doing on Dr. And performance is that fair that those two are closely.

The closely tied together for you.

Well they can be tied together, but they don't have to be tied together. So the tens of billions of dollars that of spent a year of advertising for the App installs a lot of that is tied to large businesses.

Advertising streaming services advertising King's advertising their newspaper apps and other things and we see lots of opportunity to help existing advertisers spending more of their budgets with Twitter because they see more confidence and more performance from our direct response formats, but we also see out of.

Long tail of advertisers, who don't spend very much on Twitter today.

Who will see great opportunity of reaching their customers two of clinics throughout the installs and through other AD formats over time, as we're able to do a better job, making it easier for them to reach their customers on the service so it really of brokerage.

Thank you.

Your next question comes from Lloyd Walmsley with Deutsche Bank. Your line is open.

Yes, two if I can first just just sticking with map can you kind of talk through the puts and takes of how that 50% growth should trend going forward should we think it accelerates because you now have the the new system deployed.

Versus is there an ILS impact that will drive the acceleration.

Where do you where do you think all of that nets out and then I guess looking at the <unk> guide for top line, even at the high end, it's not really accelerating despite the easier comp and <unk> was there any disruption from the episode of the capital or or anything else you'd call out impacting <unk>.

Particularly given just piecing together the disclosures from last from.

From September and October it seems like you exited December growing something like almost 50% by our math, but any anything you'd call out in <unk>.

Thanks, Mike first on map and then I'll go from the second part of the question. So we're not going to give guidance today on what that's going to do over the course of the year, but we feel like we've got some real strong momentum behind us with that 50% growth.

In the fourth quarter, and we know there's so much more of that we can do for app install advertisers with us moving product out in the market now in over 30 improvements.

And you will likely see easier comps in the first couple of quarters of the year and lapping our 50% gross in the fourth quarter, obviously is going to be.

Are there then the earlier parts of the year of what we're going to work hard to deliver for them and if you think about it $300 million in the context of tens of billions of dollars spent on app install ads and we feel like there's lots of room for us with a growing audience and our strong relationships already with the advertisers.

The second part of your question around Q1.

So.

Recall the delay advertisers typically approached the year they spend the first week or two of the year coming back to the office and planning and thinking about where they want to shop and how they want to show up in this year and it's all of the secular change that we see which I think really benefits Twitter that we have become the second screen for sports and <unk>.

Lots of parties for movies and for other things where people can't necessarily be in the stadiums or in the seats towards the had been before and as dollars continue to move away from linear television I think of lot of that accrues to our benefit but they spend the first week of to thinking about where and how they want to show up during that timeframe. We had the rights of the capital.

And that may of exacerbated that a bit of that as we look ahead and start to look ahead with the Super Bowl. This past weekend, where we were able to deliver for the over 40 of the advertisers who are advertising during the game and there are a ton of great things happening that cause people to want to come together and have conversation around sports are wrong.

The award ceremonies around the entertainment and other topics and we're really excited about our ability to deliver around those things for advertisers with a larger audience with better formats and improved relevance.

Alright, Thank you guys.

Your next question comes from Ross Sandler with Barclays. Your line is open.

Hey, Chris.

Just one for Jack and the only one for Ned.

Jack It doesn't look like the account closures from earlier in January of <unk>.

Any negative impact on the day of your trend given your your guidance, which implies about $8 million net adds for the first quarter. So just any commentary about positive or negative engagement trends on the back of those.

Changes from.

Earlier this year from them.

Ned.

Just following up on the map and Dr. So I mean based on the air disclosure here it looks like overall, Dr could be upwards of 15% to 20% of our growth in the fourth quarter. So can you just can you parse out a little bit.

What changes Youre, making to your sales approach or go to market to cater to E commerce advertisers in other categories within Dr. Besides the App installs.

Versus your kind of a strong legacy in selling brand campaigns of any color on how the go to market is changing thanks a lot.

Thanks Ross.

As I said in my opening.

<unk>.

Our audience is 80% of of our audiences in the United States.

What are the more than 50 accounts with over $25 million.

So we have a global service.

We are also not dependent upon just news and politics being more trucks Twitter.

What we're excited about.

Especially in the future of is helping everyone unlock more of the long tail of topics and interests. This is why I believe being able to follow the topics of interest is so critical and sort of important.

And because of the functionality people as soon as they sign up for Twitter.

People just spend so much time trying to find the right accounts.

Instead of really being able to focus on what topics. They are interested in in the lends itself to the better not only two of better consumption experience, but also more conversation, while toy and Thats. What we wanted to do so while we have seen an increase of news and politics, especially in the United States.

We are not in the service that's dependent upon us and as we continue to add more functionality.

Around interest and topics, we remove more and more.

Of the very light dependency on it.

<unk>.

And that just gives so much power to the individual using Twitter, but it also.

There's a lot of power to our our advertisers.

Because it unlocks the entirely new way of advertising on Twitter and kind of.

And the.

Getting introductions to will be consumers for your product or services, especially.

As we make the local topics.

Usually the problem, we add those topics rate of over 6000 topics that you can follow today.

And we're adding them as quickly as we can all around the world. So that is the one area of third point to the.

To really focus on because it unlocks so much in terms of our experience, but also of our business.

Hey, Ross on the second part of your question.

As you probably know we've got really strong relationships through our sales team with the largest agencies with many of the largest advertisers in the world.

And then we've got a strong small and medium sized business sales team, but there'll be terrific leverage for us as well over time as we make it easier and easier for advertisers of all sizes to buy really compelling direct response ads from us when we make it easier and easier.

For them to buy the ads when the ads are more and more performance.

It will attract.

Not just the advertisers with whom we work very closely.

We can go in and pitch around big campaigns, but also those that the law.

Exactly what they want to do and are running highly quantified models to assess where the best places are for them to show up with their campaigns and we think around website click center on map. There's a lot of that that's in front of us the as we've said for a while now it is important to get the product out into People's hands. So that they can test and learn the around it.

And then allow their models to adjust and so we hope to see a lot of that play out over the coming years.

We continue to improve these products you asked about commerce.

Commerce is on the roadmap if you think about the the.

The advertising funnel.

Being in the middle of around giving people the opportunity to click through the website or the download an app is really important and those have been.

Places, where we've already been able to help advertisers, but we really won't be done until we help somebody begin of purchase on the service and Youll see us broke around those things in the coming period here as we figure out the best way to do it.

Engineer, it and deliver it to people at the time.

Okay. Thank you and Chris can we take our next question from Twitter. It comes from low account of at stock biking, and they ask when can we expect subscription products to ship.

Thanks for the question from Twitter.

So nothing new to report on subscriptions today.

<unk>.

We'll continue to build out these teams and two.

Two research and also to test on Twitter and I'm sure you all will see those tests and have the opportunity to.

Participate or observe them, but I wouldn't expect you to see these be meaningful contributors until next year.

Having said that I, just wanted to get a little perspective around subscriptions more broadly.

Remember, 85% of our revenue today, the showing ads to people on Twitter and this is a one hundreds of billions of dollar addressable market.

And that is growing because of the secular shifts.

And because of what's kind of the economy right now and we see so much opportunity to deliver better and better for advertisers and to gain more and more of that market with a growing audience with better formats with better performance of those formats and so we love talking about subscriptions and the potential and the durability of the can.

<unk> and predictability to our revenue streams, but we also maintain a big focus around our revenue products and we feel really good about the pace of innovation that we're delivering around that now where it feels like things are really accelerating on the back of our improved AD server last year, where we're shifting more and more improvements now than we've been able to in the past.

Now having market Tam website clicks out as of yesterday, we will continue to work to improve these products as well.

Great. Thank you and we'll take the next question operator.

Your next question comes from Eric Sheridan with UBS. Your line is open.

And so that's true.

Taking the question my name is a little bit of a leg down if your stock Mike I Hope I live up to that so I can follow up on that.

The change it Eric.

Thank you J J Paul.

Jack maybe I'd love to ask the one big philosophical question that Ned maybe Ned if I could just come back on mass and I apologize to sort of believe in place. The Jack when you think about where Twitter is going over the medium to long term, we're talking a lot of it on this call about Dr and identifiers from getting the arbitrage of opportunity more right than wrong and you've written a lot about.

Getting decentralisation into the web and bitcoin and things like that how do you think about a parallel where parts of the web decentralized vs. Some parts of the web continue the centralized and how you sort of marry those views and how you think about aligning Twitter as a platform from the medium to long term would love your sort of philosophical and operational view on that.

And then maybe Ned just to come back to map.

<unk>.

You're talking about up 50% in Q4 can you just just starting a little bit of how much of that was an easy comp in Q4 that you called out a year ago, because it seems like it would be flat on the year and <unk> 50 in Q4, obviously, there was a fair bit of weakness between Q4, and maybe the first half of 'twenty I just want to make sure we're sort of interpreting the rate of change right.

Thanks, so much guys.

Thanks for the question.

Thank the most important thing to focus on in terms of.

Decentralising social media is it creates a much larger corpus of conversation.

It goes from anymore input.

Inputs to public conversation and.

The more conversation that we kind of access to the.

The more the better job, we can do the surface relevant content to people.

And Thats, where we will be competitive with making sure that we are delivering the best out of a much much larger.

Corpus of the conversation so as we look at things the.

We can decentralize, Chris one becomes very very obvious the problem of discovery around content.

One the.

Is easiest when the centralized and that's how we've operated for almost the kind of strict 10 years, but even that has some potential of the shift in one of the things when the product.

Last year, and our sense of testimonies, but.

In terms of where we're excited of the build to address some of the problems.

The.

Is facing section 230.

Giving more people choice around what relevance algorithms are using for re ranking algorithms are using you can imagine there are more market driven the marketplace approach.

The two algorithms and that is something that not only we can host where we can participate in.

So I think the the thing that gets me really excited about all of this is we will have access to a much larger conversation.

Kind of access to much more content.

And we will be able to put many more ranking algorithms that suit different people's needs on top of it.

And you can imagine an app store like view of ranking algorithms that give people the ultimate flexibility in terms of of how they see it.

Daryl.

Not only help our business, but drive more people into participating in social media in the first place. So this is something we believe in not just from the open Internet standpoint, but also we believe it's important.

And really helps our business thrive.

Significantly in the way given how much bigger it could be.

Hey, Eric on the second part of your question around map. So it's really hard to look at the growth from one quarter.

2019 to their growth and another quarter of 2020 and a sign of it all just the percentages as you can imagine with a product that we've rebuilt with over 30, new features many of the true already avail.

Available in Q4.

Moving to earn the trust of the advertisers who use our service every day and many of the advertisers who show up in Q4 of 'twenty are different than the ones.

We set up in 2019, those who are the same or often advertising something different.

New game.

A new.

Rollout of a second season of the show on the streaming platform or something else that they didn't have the year before and so they are constantly testing and observing where they get the best performance and where they want to show up with their AD dollars and so we do have we did have an easy comp in Q4 of 19, because we had faced the <unk>.

The challenges in the middle of Q3 of <unk> 19, which persisted.

Q4, but we still had to go out and the other in every one of those dollars with this the largely rebuilt but not completely rebuilt product in Q4, so as I look ahead.

Sales like what's I think the question is where do we go from here and we're going to work hard to continue to grow the size of.

Map and direct response more broadly from now into the future because we know that that's an important segment for our advertising customers. We know that that is a large and growing part of the digital ads.

Market, so and we feel like we're well positioned to deliver against that with all of the inputs that we've got.

Your next question comes from Brian Nowak with Morgan Stanley. Your line is open.

Great.

At the earnings Tuesday, So two questions first one and then I appreciate the color about the way to think about <unk> growth over the over the course of the year.

Good color question, so as you've as you've sort of been on the journey of improving overall existing user retention and driving higher adoption of new users can you just talk to us about sort of any progress you've made on that front of the sort of gives you confidence out of sort of talked to a multi quarter MD of <unk> growth through the course of the year and within that within the comments how are you thinking about gross.

In the U S.

And then second a bigger picture question I know throughout the second half of last year, you took some efforts to sort of improve your data capture to maybe drive better relevancy of your AD units talk to us about some examples of where you've improved your overall data set and youre targeting offerings for advertisers.

Great. Thanks, Brian So an MBA new first.

When we forecast the au, which whether we share with you. All are not you can imagine is an important part of the work that we do.

As we plan and think about how the resourcing.

We look at the products that we're building, we would look at history and try to.

I think through how things that have happened in the past are likely to impact the future. We'll look at how our retention rates have improved and evolved over time and we try to roll those forward, we don't roll forward Global Pandemics.

And there are certainly the exogenous events that happen that are harder for us to predict but when.

We have a base of our foundation.

What's the forecast the numbers that we share today fall out of all of the hard work of data to analyze those and think about how we roll those forward.

We do think there's opportunity for us to continue to grow in the United States and outside of the United States.

<unk>.

Hundreds of millions of people in the United States, There's still don't use the service every day.

With a very healthy top of funnel, both in the United States and outside of the United States.

We have lots of that Thats every day to help people find what they're looking for better so that the lake Twitter a part of their daily habit and this group that joined us around the time that shelter in place began in mid March that has stayed with us better than previous groups have really gives us confidence that we are doing a better and better job jackpots about topics.

And how there's real opportunity for us the surface those for people earlier in their experience, we're getting better and better at that not just at Onboarding, but in the initial weeks with us. So that we can help them have a better experience the even within topics I'll have to be thoughtful about how we show somebody on the east coast.

He says that the baseball fan different suites of somebody on the West Coast, who is the baseball fan.

And as the adaptor learned around these things they can have a better and better impact on our ability to retain the people who come to the surface of the time. The second part of your question was around our ability to.

The leverage more data in order to delivery of them better for advertisers. There's a lot that we've done here I'll give you a few examples one is as we've talked about in the past we have taken.

<unk> taken the opportunity over the last few quarters to prompt people a couple of times outside of the EU asked their permission to give them a more personalized experience and this is something that we try to do in a transparent way that builds trust. It doesn't take it away that makes it clear the people exactly what we're asking the gives them the opportunity to sales.

If they want to these have been successful both in terms of getting more people to choose a personalized experience, but also in terms of not adding the people who said no. It feels like we did anything untoward in how we approach them. So that's one example, the second one is when you take a model that we use to predict.

How kind of who want to see and not the AD and we apply a learning period sort.

To give the model of chance to adjust for a few days so that it can learn from.

How.

As our gains of in the early days and then adapt over time, we found that that has helped a lot and lastly, just sort of how people use the service as we know more and more about what they're looking for because they tell us they care about a whole topic not just cobbling together the accounts that they still planning from the about about that topic.

If it goes from events specific timeline.

No exactly weighted visit the care about in the moment as they get us signal when they search something on the service there are more and more opportunities for us to leverage those signals some of which we've had for a long time that there's still opportunity to leverage better than we have in the past when others, which are newer to us we still see lots of opportunity to better utilize those to show people more.

And more compelling ads over time.

Great. Thanks, Ed.

Your next question comes from Heath, Terry with Goldman Sachs. Your line is open.

Great. Thank you very much Jack you've been.

Going through the stage in terms of.

Content on the platform, where you've got to get more engaged probably more engaged than you have been since the information quality initiatives.

Around harassment when you took over immediately after returning to CEO.

To the extent that there is any parallel there does it give you a sense of what these efforts that of that improving the dialog on the platform can do for user growth and engagement longer term.

And then Ned.

The extent that you've now re launched the AD server revamped map when you say where would you say we are in terms of fixing those foundations that you referred to are week per week, 20% of the way down to 80% of the way done.

What would you say of sort of the next major process on that roadmap you referred to.

Yeah. Thanks for the question, we still believe the over the long term.

Our focus on promoting healthy conversation is of course Victor.

And we definitely see the the effects of that.

As you mentioned, our earliest house were around the abuse and harassment and now we.

Our.

Broadening our scope from misleading information, we focused on three areas public health civic integrity and manipulated media.

I think ultimately over time.

This is a problem solved by the <unk>.

We're using Twitter, so so that means giving folks.

Much better controls to perform moderation individually or as a group.

Also things like.

Our beta we launched recently called Birdwatching Virtualized people out of context to treats the.

So just give people more broader context from the things that we are not able to handle.

The centralized service so the more we kind of decentralized the moderation.

And to give people better tools to curate their experience.

I think it continues to be of very very strong growth vector for growth over.

Over the long term.

Can you sort of the second part of your question is there's always stuff for us to do to improve the foundation, but when we think about the revenue product area in particular, which is I think for you of bookings with.

With the rebuild of the AD server with the confidence that we have with that work now nine.

10 months behind us and the proof points that we're really moving faster as a result of having that we're complete with the better staffing that we're delivering to those teams with revenue product being our number one company priority with a clear multiyear roadmap and the confidence to grow head count 2012.

20% or more of this year and gross expense of 25% of more we felt really good about our ability to be playing offense and revenue product and thats why the over time youre going to states continue to improve our existing.

AD formats, Youre going to see us move further and further down the funnel until you can start to buy something on Twitter, where youll see subscription opportunities for consumers and for businesses, where youll see that SMB opportunity become bigger and bigger for us over time, as we work the product opportunity and the sales side of it.

I'm not sure from a percentage perspective had to answer your question, but we feel like we're playing offense now revenue products.

Great. Thank you both.

Thank you and the uptime from just one last question. Please operator.

Yeah.

And your last question comes from Michael Levine with pivotal research your line is open.

Thanks, So much for the question guys I promise not to ask yet another map one but the one question I had was really around gross margins.

I know the obviously before you guys used to basically get out a gross in the Tac number so.

I think folks are trying to understand and unpack how much of this may be around public cloud how much of this is around content cost and how much of this might just be.

More revenue is basically coming through the of the Tac associated with it.

Great. Thanks, Michael So number there of three big buckets. There are a few other things the three that I focus you on around cost of revenue one is our infrastructure whether it is depreciation for servers that lives in our data centers or it's in quarter spend.

Where we're sending the check to Google cloud or eventually to AWS.

And Thats, a very big bucket and Thats going to continue to grow over time, it'll scale with things like our needs to do more and more analysis, which we will do an ROI analysis. When we do that work to make sure that there is a pay off for us.

We tend to find that when our teams have access to better analytics from the best tools at the best Cloud partners debt. They can do better work then they were able to previously.

So thats one bucket that will grow over time, the second bucket is traffic acquisition cost headwind.

<unk> revenue is higher Tac will tend to grow with revenue. It also kind of a little bump in the middle of this year. When we added the cross install team as their revenue has tac associated with it.

And then the third bucket that can be more variable and as long as you are is that revenue share where the content partners bring awesome clips and highlights the Twitter and we split in all dollar with them, they're part of the AD dollars of shows up in cost of revenue.

And in a year like this you saw fewer of those dollars in Q2 and you saw more of them in Q4 of just the way that the event calendars shifted.

Now remember when we think about the profitability, we're going to be more gross profit dollars sensitive than gross margin sensitive and so they can vary over time and the lower.

Our biases.

You should see leverage.

When we deliver our revenue outcomes like the one that we did today when you add up all of the expenses to run the company.

Terrific. Thank you so much for the clarity.

Thanks, Michael.

Now I would now turn the call back over to management for closing remarks.

Okay, great. Thank you and thanks to everybody for joining US. We appreciate your interest in Twitter, we look forward to seeing you all at our virtual analyst day on February 25 at nine Am Pacific time until then we will see you on Twitter.

Ladies and gentlemen, thank you for participating in today's program. This concludes today's program you may all disconnect have a good day everyone.

Okay.

Okay.