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Twitter sees drop in revenue but surge of new users

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The global pandemic and U.S. protests are forcing a pullback by advertisers on Twitter, but it’s also led to an unprecedented surge of users. 

Average daily user growth spiked 34 per cent in the second quarter, the company said Thursday, the largest jump in users ever recorded by the company.

But the company took a huge tax hit to earnings, posting a net loss of $1.2 billion US, or $1.56 per share, in the April-June period, compared with a profit of $1.1 billion US, or $1.43 per share, a year earlier. 

Revenue fell by about one-fifth to $683 million US, far short of the $702 million Wall Street had expected, according to a survey of analysts by FactSet. 

Twitter’s advertising business was hit harder than its larger rivals Google and Facebook, and analysts had expected the bleeding to continue in the second quarter. The company said ad revenue made a “gradual, moderate recovery” relative to levels in March but many brands then slowed or paused their spending in late May to mid-June, following the surge of Black Lives Matter protests in the U.S. 

“We continue to see headwinds from lower global advertising demand due to COVID and civil unrest,” CEO Jack Dorsey said. 

Ad revenue fell 15 per cent in the last three weeks of June, which was better than the 27 per cent decline in the final three weeks of March, with advertiser demand returning as the protests subsided, chief financial officer Ned Segal said in the earnings call. 

Twitter also said it was exploring “subscriptions and other approaches to complement our advertising business,” though it was not expecting any revenue to result this year. Dorsey said on the call that the company would have a “really high bar for when we would ask consumers to pay for aspects of Twitter.”

New users have been flocking to the platform as they isolate, with the number of daily active users jumping to 186 million. 

“Twitter’s strength as a news and entertainment source has helped buoy engagement during the pandemic as housebound consumers use the platform for real-time news and information,” said eMarketer analyst Jasmine Enberg. But she does not expect this to continue as stay-at-home restrictions begin to lift and people start returning to more normal routines.

Dorsey feels ‘terrible’ about worldwide hack

In the earnings call, Dorsey also addressed an embarrassing hacking incident last week that compromised the accounts of high-profile users, saying he felt “terrible” about it.

That hack targeted 130 accounts, including world leaders, celebrities and tech moguls, and appeared designed to lure their Twitter followers into sending money to an anonymous Bitcoin account. The company revealed more details Wednesday, saying hackers accessed the direct message inboxes of 36 accounts, including an elected Dutch official. It didn’t identify the official, but Dutch anti-Islam lawmaker Geert Wilders said it was him.

“Last week was a really tough week for all of us at Twitter,” Dorsey said. “We feel terrible about the security incident that negatively affected the people we serve and their trust in us.” 

Twitter executives deflected questions on another challenge: a social media ad boycott running for at least the month of July, and therefore not counted in the second quarter. Facebook is the primary target of the boycott by hundreds of advertisers over its policies and actions on hate speech and misinformation.

The boycott’s effect on Twitter is less clear, with some advertisers pausing ads on all social media, though some analysts believe some ad dollars could be redirected away from Facebook to Twitter.

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