Twitter TWTR Q2 2021 Earnings Call Transcript

Speaker 1: (00:00)
Good day, ladies and gentlemen, and welcome to Twitter’s Second Quarter 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

Speaker 1: (00:16)
I would now like to turn the call over to your host Krista Bessinger, VP, Investor Relations. Please go ahead.

Krista Bessinger: (00:25)
Thank you. Hi, everyone, and thanks for joining our Q2 earnings conference call. We have Jack and Ned with us today.

We published our shareholder letter on our Investor Relations website and with the SEC a couple of hours ago and hope that you’ve all had a chance to read it. As usual, we’ll keep our opening remarks brief, so that we can get right to your questions. As a reminder, we will also take questions asked on Twitter. So please tweet us at @TwitterIR using the hashtag #TWTR. During this call, we’ll make forward-looking statements, including statements about our business outlook, strategies 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-K and 10-Q, and upcoming 10-Q that will be filed with the SEC. Also, during this call, we 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’d like to turn it over to Jack.

Jack Dorsey: (02:01)
Hello everyone, and thanks for joining us. With a strong Q2, total revenue hit $1.19 billion, with ad revenue up 87% year-over-year driven by faster shipping cadence, strong sales execution and a broad increase in advertiser demand. Average monetizable DAU reached 206 million, up 11% year-over-year, in line with our outlook and historical seasonal trends.

We intend to build an ecosystem of connected features and services focused on serving three core jobs, news, which is what’s happening, discussion, conversation and helping people get paid. Every single person in the world has some need for at least the first two and frequently the third. Building a model like this, isn’t easy of fast, it’s deliberateness ensures resilience and ever-increasing global value.

There are three trends relevant to Twitter and you, our shareholders, AI, decentralization and the internet finally having access to a global native currency in Bitcoin. All these will help our do our jobs better and we intend to lead the way in each.

With AI and machine learning, we increase relevance and discovery, a long-standing issue on Twitter which we’re improving every day, from sign up to in-app sessions. With decentralization, we increase the size of the corpus of conversation we have access to and improved conversational help by giving more power to individuals. And with the global currency, we can ensure people and companies can freely trade goods and services anywhere on the planet.

The ecosystem model will enable an experience where an individual or company of any size can tweet, reply, move to an audio chat, build a following, write a newsletter, charge for content and eventually sell a service or good all in one simple flow. Each part of this cycle will positively reinforce other parts and build upon itself. I’ve seen this work elsewhere and it will work even more for Twitter.

Along the way we’re going to try things that end up not being a fit. We’re going to be fast to recognize this and take action without hesitation, as we did with Fleets. There are better solutions to the problem we were trying to solve than the stories format everyone has adopted. Entirely new formats that are unique to Twitter and our model, this is what we’re starting to create. Expect us to start and stop many more features than we have in the past.

That’s all from me for now. I want to thank you all for your continued trust and belief as we do our work. Ned?

Ned Segal: (04:36)
Thanks, Jack. Before we get into Q&A, I’ll cover a few topics. As Jack noted, Q2 was a strong quarter, particularly for advertising. We exited March with momentum across both brand and DR. In April, trends continued to improve with ongoing strength throughout the quarter across all major products and geographies. A growing audience, better ad products, strong sales execution, global events and advertiser product launches all had a big impact on our performance.

Ned Segal: (05:04)
As a result, we exceeded the high end of our guidance range by 10% or approximately $110 million. In our guidance, we equally weighted the slower start to the year that we saw in January and February in brand, with the strong return to brand spend that we saw in March, which was, in hindsight, too conservative. The impact of ATT on the second quarter was also more muted than we expected, although it’s too early to assess the long-term impact.

Ned Segal: (05:28)
mDAU grew 11% year-over-year and 3% quarter-on-quarter, in line with historical seasonal trends and the outlook we provided in April. Within our global mDAU growth of 11%, our sequential growth in the US may get some attention. Here is some context. In the three years prior to COVID, reported quarter-over-quarter growth for US mDAU in the second quarter has ranged from $1 million up to $1 million down. So our performance this year is relatively consistent with this historical range, despite an atypical backdrop, which includes either new cycles in the US, as well as the beginning of reopening across many communities, where consumer behavior likely has not yet normalized.

Ned Segal: (06:10)
While it’s too early to tell how people’s behavior may change as some economies reopen, while others are still struggling, I’d remind you that sequential growth for US mDAU in Q3 over the last four years has ranged from flat to up $1 million, suggesting US mDAU could be flat on a sequential basis in Q3 of ’21.

Ned Segal: (06:29)
The good news is that we’re confident in our ability to accelerate growth longer term and in the near term, the same trends have been great for advertisers, with a return to global events, product launches and our better ad products all driving improved advertiser ROI and our ability to deliver strong results. And there are no changes to our thinking about mDAU over the course of the year. We continue to expect low double-digit year-over-year growth in Q3 and Q4, with the low point likely now behind us.

Ned Segal: (06:58)
Given the momentum we’re seeing as we enter the second half of the year, we’re updating our thinking on investment and revenue. Our expectations for 25% or more expense growth in 2021 and revenue growing faster than expenses, now appears too low. We are accelerating our investments and now expect headcount, along with total costs and expenses to grow 30% or more for the full year with a focus on engineering and product. As you’d expect, incremental headcount investments in 2021 will flow into our annual expense base in 2022.

Ned Segal: (07:31)
With regard to revenue, we continue to expect total revenue to grow faster than expenses in 2021, assuming the global pandemic continues to improve and that we continue to see modest impact from the rollout of changes associated with iOS 14.5. You also may have noticed in our shareholder letter that we purchased $334 million of reflecting the pullback in share price we saw in early May. We’ll continue to be thoughtful and nimble as we move forward, likely varying our pace based on the operating environment, our capital needs and market conditions.

Ned Segal: (08:07)
In summary, we’re pleased with our results and I’m also ready to take your questions. Operator?

Speaker 1: (08:14)
Thank you. Ladies and gentlemen, if you have a question at this time, please press star then one on your touch tone telephone. If your question has been answered, or you wish to remove yourself from the queue, please press the pound key. Comes from Ross Sandler with Barclays. Your line is now open.

Ross Sandler: (08:35)
Hey guys, thanks for taking the question. You had a leadership change in the sales organization recently. So anything new we should expect from that group? Any increased focused on new areas? Obviously a lot of momentum in your ad sales business right now. So any color there will be helpful. And then, on the US DAU, I guess with all the product innovation going on right now, is that just kind of COVID burn-off impact or any other color you can give us on retention?

So on the first part of your question, Matt is … Matt Derella, who is leaving us after nine years, has built an incredible team including a leadership function, in Sarah. We have full confidence in Sarah’s ability to continue to push our team and also has amazing collaboration with our Head of Revenue Products, Bruce, and that’s really what we’re looking for. So no specific changes there. We are moving from someone really strong to someone really stronger, and really excited about what Sarah will bring to our leadership team. Ned?

Ned Segal: (10:03)
Hey, on the second part of your question, Ross. So, one, I just point you to the typical seasonal trends that we’ve seen, when you look before COVID, where in ’17, ’18 and ’19, we were somewhere between down $1 million to up $1 million or flat in the reported numbers. So this feels consistent with that.

Ned Segal: (10:21)
When you take that in the context of a slower news cycle in the US and people coming out of shelter and you keep in mind that they likely haven’t normalized their habits, those for whom Twitter’s a new part of their daily ritual and those who were already Twitter faithful active people beforehand. I think it’s too early to call exactly how it all plays out from here.

Ned Segal: (10:44)
But when we look at all the product work that we’re doing to make it easier for people to find what they’re looking, for adding 2,500 topics this quarter, including topics in the on-boarding flow, getting people more control over who can respond to them and other initiatives such as those, we feel really good about our ability to hit that $315 million DAU number that we put out for the end of 2023 and to change the trajectory of the curve in between here and there.

Ross Sandler: (11:14)
Great, thanks a lot guys.

Speaker 1: (11:17)
Your next question comes from Doug Anmuth with JPMorgan. Your line is now open.

Doug Anmuth: (11:24)
Thanks for taking the question. One for Jack and one for Ned. Jack, can you just talk more about how you see Bitcoin becoming more deeply integrated into Twitter, particularly around some of the newer products like Super Followers and Spaces and how that can drive both engagement and monetization for Twitter over time?

Doug Anmuth: (11:42)
And then Ned, just hoping you could talk more about your MAP and other DR ad product changes and how those are resonating with DR advertisers? I know it’s a strong brand quarter, so it’s probably early on moving that mix, but the advertiser base, and any commentary around MAP revenue, you talked about it-

Doug: (12:03)
… commentary around map revenue. You’ve talked about acceleration over the last couple quarters.

Yeah. So obviously, I’ve been reading and talking a lot about the clients that I thought it was important that I explained a little bit more as to why, in my opening remarks. I think not focusing on the use case of the internet having native currency and Bitcoin probably is known to be the best candidate for that role, that’s what I think we should really focus on. If the internet has a native currency, global currency, we are able to move so much faster with products such as Super Follows, commerce, Subscription, Tip Jar, and we can reach every single person on the planet because that instead of going down a market by market by market approach. I think this is a big part of our future. I think there’s a lot of innovation about just currency to be had, especially as we think about de-centralizing social media more and providing more economic incentive. So I think it’s hugely important to Twitter that we continue to look at this space and invest aggressively in it. And we’re not alone here. Look at what [inaudible 00:13:30] Libra or DM or… Not sure what they’re calling it right now, but there’s an obvious need for that. And I think an open [inaudible 00:13:41] in that is the right way to go, which why my focus and our focus will eventually be on bitcoin.

So I do think it allows speed and allows a lot more innovation and it really opens up entirely new use cases here for everyone on Twitter. Ned?

Ned Segal: (14:02)
Hey, Doug. On the second part of your question, a couple of things. One, when we think about an inflection point in terms of the number of advertisers on Twitter, that’s in front of us. The work we’re doing in SMB, which had another strong quarter so far, has been to help grow the spend from the existing customers. We put a pilot out for business profiles back in April, which so far is going well, but more work to do there. And while we continue to make it easier for small businesses with a new version of Quick Promote, to buy ads on Twitter and to help them understand the value proposition of doing so. In terms of MAP, we feel really good about our progress there. With a revamped product out in February, we began to see some strong momentum there, and that momentum continued into Q2. I’ll give you a couple of fun facts. The streamers, as they continue to grow [inaudible 00:14:58] new shows and get people interested in their services, they grew their spend over 40% sequentially [inaudible 00:15:07].

Ned Segal: (15:06)
We are piloting a playable ad format for gamers so that you can play a [inaudible 00:15:14]. We have multi destination carousels inside of MAP so that you can send people to different places. These are great examples of some of the innovation. When you add those up with better age-based, better location-based targeting, and the ability to show MAP ads to those folks who have limit ad tracking on before we couldn’t report on them earlier, but now we can as a part of the SKAdNetwork, we’ve made really good progress here and feel like we’ve got the wind at our backs on MAP going into the second half.

Doug: (15:46)
Thank you both.

Operator: (15:49)
Your next question comes from Rich Greenfield where the LightShed. Your line is now open.

Rich Greenfield: (15:58)
Hi. I want to follow up, Ned, on that last question that you were just talking about local. I think in the press release, or I guess in the investor letter, there’ 175,000 sort of cities comment. And it seems like you called that out for a reason in terms of your ability to target. To your point, I think we’re very focused on how you expand local advertising. What was being done before? How many cities? What does that comment? Can you put it into context? And I’m curious if there’s other things that you can look at that tie to that in terms of other things on the ad product side that you’re doing or about to do that are starting to really make local advertising more appealing.

And then just a big picture question for Jack. We’re seeing a lot more topics and topic suggestions, and it seems like you’re getting increasingly specific with your topics that you’re offering up. Could you just maybe give us a sense of what you’re learning and how you’re adjusting. Leaving Bitcoin aside, I think Topics has been one of the biggest things you’ve been focused on over the last couple of years.

Ned Segal: (17:11)
Sorry. I’ll start on the first part of your question. Rich, we feel like we get really unique and differentiated signal in how people are using our service. When they follow one of the 9,500 topics, we’ve got 2,500 more topics this quarter. As we get any more topics, we get great signal about what people are most interested in, where they are, the places they care about that might not even be where they are today. Leveraging that signal for small businesses to find their customers, whether those are small businesses that have a distributed customer base or those that are local to a specific market, we think can really help us help small find their customers in a differentiated way.

Ned Segal: (17:59)
So the cities, I think that plays out for topics over time. It plays out right now in terms of how we can help an advertiser target their customers or people who are in a given location. We’ve made improvements to our age-based targeting as well. These are things that help large advertisers, as well as the smallest advertisers. I know when you look at why you see an ad and you see that it’s because you’re in a state or a country, or you’re a certain age, we’re getting better and better at helping advertisers find their customers this way. And this quarter is an example of some of the impact that we’re seeing from that.

And on what we’re learning from topics, we continue to understand how important it is to our service, both sign up and also within the app and the experience, and how great a foundation it is for everything that we really do, including newer things like Spaces, which are very, very topic focused. And as we dig into conversations even more, usually those spaces are focused on one particular topic, but sometimes they break into many. And being able to understand how that is and also create snippets of the conversation allows for more content around those interests and people hopefully get more and more value. We continue to add more topics, more languages, but I think the important work to look forward to is how we use a similar foundation and move away from just purely a broadcast mechanism and into more of a narrow casting mechanism where people can not only get a very specific view on the topic that interests them in the world, but also participate in a room that feels much smaller than speaking to the real world, which is one of the reasons-

Doug: (19:52)
Are you talking Spaces specifically when you say narrow, or you’re talking more broadly?

More broadly. More broadly in a narrow way. Narrow casting is a use case that we want to solve, and Spaces is one example of that, but Spaces can also be used for broadcast like this.

Ned Segal: (20:10)
Rich, remember back to the Analyst Day, where we talked about communities and over time, the ability for people to tweet directly to a community, as an example. Think about an advertiser, leveraging that community. If there’s a guy at Twitter who tweets about cookies a lot, and some people may not be interested to know-

Nabisco.

Ned Segal: (20:30)
Some people may not be interested in those sweets just because he’s the CFO of Twitter. And it’d be cool if he could tweet to the cookie community and spare the rest of you his cookie tweets. And there’d be a target rich environment for people who wanted to buy chocolate chips or other things like that. I’m sure you can think of a few other relevant examples too.

Absolutely. Thanks for putting a little bit of a frame around that. That’s helpful.

Operator: (20:55)
Your next question comes from Mark Mahaney with ISI. Your line’s open.

Mark Mahaney: (21:01)
Thanks. Two questions, please. Could you talk about what impact you would expect the Olympics to have on your outlook? What’s embedded in there? I know from time to time, you have called out events like World Cup contribution. So just talk about what the impact, I guess, of a crowdless Olympics is likely to be this year. And then your commentary about IDFA, the Apple changes, it almost seems like you’re [inaudible 00:21:26] a little more muted than what we hear or a little less uncertain than from other advertising platforms. Are there particular reasons why you think that the idea of the IDFA impact would be more certain would be clearer for you than it would be? Maybe it’s your advertiser base or the type of formats. Just any color on that would be helpful. Thanks a lot.

Ned Segal: (21:49)
Okay. Thanks, Mark. So first on the Olympics, we’re really excited about the Olympics. One, from an audience perspective, this is just a great way to engage people who use Twitter, where they… They’re going to be able to come to Twitter and find the medal moments right after they happen. The highlights will be there. There’ll be pre-roll in front of them from advertisers who have been waiting for this opportunity to connect with their customers around a big, global event like this. I’ll point you back to last year where there were a lot of events that happened where fans weren’t in the stands. Twitter took the place of the stands. It was the roar of the crowd. It was one of the fewer places where advertisers could connect with their customers and know that they’d be there. So we’ve been working hard to make sure that this can be a success for us.

Ned Segal: (22:28)
It’s going to be an Olympics unlike any other, and it’s still uncertain exactly how it plays out. We haven’t broken it out in terms of how we quantify it. We tend to do that last few days because you’ve got to judge how much of spend is truly incremental. There’s some subjectivity in that, and I don’t think we’d do it justice. But when we step back from the dollars and the specific audience on a given day, this is a great opportunity to showcase for people how much better Twitter is from the last time they came, if that was the World Cup or the Olympics or a different event, as opposed to them having Twitter as a part of their daily habit, and the same thing’s true for advertisers. So we’re really looking forward to the Olympics getting going with the opening ceremonies here shortly.

Ned Segal: (23:07)
The second part of your question on ATT or IDFA, so far we’re pleased with what we’ve seen, but it’s too early to call a long-term trend. I point you to a few different things. The first is we’ve worked really hard as long as the company has been around to build trust with the people who use our service. Hopefully that means that when they’re prompted from Twitter and we give them a really clear explanation of what we’re asking, hopefully that means they’re more likely to accept the prompt from us than they might be from others. Second, we’ve worked really hard to implement the SKAdNetwork network, to give that data to third party measurement partners, to now show MAP ads to people that limit ad tracking on, to continue to work on ways that we can help attribution in a post cookie world. I think all these things are helping us a bunch with advertisers and with the people who use our service. But-

Ned Segal: (24:03)
With advertisers and with the people who use our service, but given it’s really not been that long here, not everybody’s upgraded and agencies and advertisers and the broader ecosystem likely hasn’t fully adjusted yet, we’re going to have to wait and see how this plays out completely. The last thing I point out is just remember at the end of last year, we were 85% brand, 15% DR, and there’s still lots of opportunity for us to better leverage first-party signal than we historically have. And so we’re probably coming at this from a different angle than many other ads platforms are, and we see opportunity where others may see it differently.

Speaker 2: (24:38)
Thank you, Ned.

Moderator: (24:42)
Your next question comes from Justin Post with Bank of America. Your line is open.

Justin: (24:49)
Great. Thank you. Maybe one more on US DAUs in the quarter. Any change in your top of funnel conversion to DAUs? What drove the quarter over quarter decline? Is it just less people coming into the top of the funnel or maybe less repeats? And then, Ned, you reiterated your view on 315. Sounds like you’re confident. Can you just remind us what gives you that confidence? Is it the usage you’re seeing for new products? Or as you look at the pipeline of products that are coming out, do you feel optimistic on that? How do you feel about what’s going to be really drive US users from here? Thank you.

Ned Segal: (25:30)
Hey, Justin. First on DAU, so when we step back and look across geographies, across times of year, and how people are coming to Twitter, it’s been remarkably consistent and healthy. So we’re getting a lot of at best. It evolves from one geography to another at different points in the year, but overall continues to be really healthy. In the US, as new cycles come and go, as habits evolve post- COVID, hopefully, people are still merging their old pre-COVID habits with their new habits. For many people, that means that they’re new on Twitter and they’re sorting out all kinds of different things that have changed in their lives. So we’re not sure exactly how that plays out, but when we look at Q2, we continue to see healthy usage of service and the DAU trend, since it was consistent with what we saw pre-COVID, how we’re not sure there’s that much to read into it just yet.

Justin: (26:31)
Okay. And then-

Ned Segal: (26:32)
The second part of your question … Sorry. The second part, Justin, you were asking about the 315. When we look at the 7 billion people in the world who don’t yet use Twitter, when we look at the 300 million of them who are in the United States, we still see lots of opportunity to add whole groups of people who look just like those that use the service today, whether they’re in the US or in other parts of the world. And when we think about our product roadmap, it’s designed to help all of them get better usage out of Twitter than they do today. That top of funnel, which continues to be healthy and consistent, gives us confidence that we’re getting the at best, and we just have to continue our work to help people find what they’re looking for and feel safe being a part of the conversation.

Justin: (27:15)
Great. Thank you.

Moderator: (27:19)
Thank you. And we’re going to take our next question from Twitter. It comes from the account of Ty Lance Jones, and he asks, when does Twitter plan to roll out Twitter Blue globally? And are there any plans for other subscription type offerings for things like TweetDeck?

Jack: (27:40)
Yeah, so we wanted to learn as much as possible and learn as quickly as possible. And so we started with two markets that we felt confident we would optimize for learning. We started with an initial package of features, again, something small so that we could test a bunch of theories and then build upon. So what we’re attempting to do right now is try to make sure that we find the right product that we feel comfortable rolling out to the entire world and feel comfortable charging for it.

Jack: (28:14)
And of course, everything is on the table in terms of what we’re looking at. Certainly, there’s categories for individuals who want features and there’s also categories of features for businesses or people who are trying to make money off of Twitter that we think point to a pretty significant bundle, as well. So we’re still in the learning phases. We’re moving as fast as we can, but we want to make sure that before we roll it out everywhere that we have something compelling that people actually want to exchange their hard-earned dollars for.

Moderator: (28:53)
Thank you. Operator, we’ll take the next question, please.

Moderator: (28:58)
Your next question comes from Marie [Ehredt 00:29:00] with [Dinacord 00:29:01]. Your line is open.

Marie: (29:05)
Great. Thanks for taking my questions. It seems like [SMB 00:29:08] is a clearly focused area, and it’s nice to see sort of accelerating revenue growth within that cohort and enhanced functionality. Is there any more color you maybe can share on what the roadmap looks like on that front, whether it be types of placements, [inaudible 00:29:23], or sort of expanding sales head count that is better focused on the segments? And then, I have a quick follow up.

Jack: (29:35)
Yeah, small businesses are really important to us. There’s a lot that we’re doing foundationally to make sure that we’re serving them better, including all of our focus on topics. And a big part of that focus is local, as well. Because it’s critical for any small business to be able to follow my neighborhood and also see them as the businesses within it. And their perspective work [inaudible 00:30:04] a lot, but also on the revenue product side. We launched the rebuilt quick promote offering, where it’s expanded location, age, and gender targeting. [inaudible 00:30:16] a lot of what small businesses need are just something simple and straight forward so that they can get back to setting their business up. But this came at a [inaudible 00:30:25] of 26 increase in revenue per campaign versus before the launch. And then, we launched the pilot of professional profiles for businesses, nonprofits, so that [inaudible 00:30:41] what type of account they’re engaging with and that they might be engaging with a business or a nonprofit, which also may lead to more tools for that business or non-profit, as well.

Marie: (30:55)
Great. Thank you. And just to follow up on IDFA. Is there anything you can share on how CPM stranded for iOS versus Android users during the quarter?

Ned Segal: (31:07)
Hey, Maria, we haven’t broken that out in the past. I do think even if you got a data point around it, it may be too early to draw a straight line between data [inaudible 00:31:17] agencies, the broader ecosystem. I think we’ll do in the coming quarters [inaudible 00:31:24] data that they’ve got when they make decisions about where they advertise and how they measure success of their advertisements. And so there will be near term movements and there would be anecdotes to support lots of theories, but I think it’s just going to take a little time here. When we stepped back from it, we feel really good about how we’ve shown up so far and our ability to continue to leverage, do a better and better job leveraging our unique first-party data when we’re helping advertisers on Twitter.

Marie: (31:50)
Got it. That’s very helpful. Thank you for the call.

Moderator: (31:57)
Your next question comes from Brian Nowak with Morgan Stanley. Your line is open.

Brian Nowak: (32:03)
Great. Thanks for taking my questions. I have two. Suddenly, the US DAU, it’s getting a lot of attention. Maybe one way to sort of clear it up a little bit. Could you just help us understand a little bit what’s going on on time spent per user per day or time spent in the parts of the world that are a little more reopen? Maybe the engagement trends are more important than the actual number of people. So help us out on time spent a little bit, if you could.

And the second one, just to go back to Justin’s question earlier on the forward drivers of US DAU, is 300 million-ish Americans. There’s a lot of them who are not on the platform. What are like one or two of the key hurdles you think you really need to overcome to convert more of those Americans to use the platform more regularly? Thanks.

Ned Segal: (32:50)
Hey, on the first part of the question, then I’ll turn it to Jack on some of the opportunities and the product look. We haven’t broken out time spent, Brian. We don’t [inaudible 00:32:59] people a great experience on Twitter. If they come looking for a highlight, they come looking for a conversation, or they’re looking to get informed about a broad array of topics, we want to solve what they’re looking for, and then help them get on with whatever they were doing before.

Ned Segal: (33:16)
If we do that, they’ll come back to Twitter the right amount, and we’ll continue to build trust with them that we can solve what they’re looking for when they’re looking for it. So I’m not sure that time spent would help as much. I just keep watching that DAU number because as we continue to grow that through continuing to improve the product and make sure that when the events and topics that are happening will bring people to Twitter, that we’re doing a better and better job for them, the DAU number is going to be the best way to measure success. Let me turn to Jack on the second part of the question.

Jack: (33:51)
I think the biggest opportunity is that we have is around reconsideration and when people see a tweet or when they see a [inaudible 00:33:59], that they’re coming to our service and they’re finding something else. They’re finding something else that interests them and our algorithms are better in terms of finding the most relevant. And we have different formats, which we can serve these topics on such as spaces more and more that narrow casting [inaudible 00:34:29] it’s even stronger.

Jack: (34:33)
Really strong reconsideration, especially when it’s tied to events like sports and obviously news events, as well. So we’re looking for much more [inaudible 00:34:56] removing a lot more friction from onboarding and re-onboarding and the sign-up flow, itself, for the resound from their new cases to make sure that when people come in for one reason, however small that is, that they’re seeing a much broader universe that’s a lot more relevant to them than it was in the past when they followed one account and only found one or two relevant tweets on an episodic basis. So now we have a much better chance at doing that, at just making sure that we get the right entry path.

Great. Thank you both.

Moderator: (35:42)
Your next question comes from Deepak [Deepak Messazanin 00:35:45] with Wolf Research. Your line is open.

Deepak: (35:48)
Hey, guys. Thanks for taking the question. [inaudible 00:35:51] platforms, what was the challenge for Trudeau to make the decision to do shut it down? And then related to that, you tested ads there for a few days and we saw-

Deepak: (36:04)
… big brands advertise there. Is there opportunity to bring those ads full screen into newsfeed or other areas of the app? Even the better form factor is because like the ads actually have a premium pricing. Just wanted to get your thoughts there.

Yeah. The original problem we’re trying to solve with Fleets was around [inaudible 00:36:27] and helping people feel comfortable sharing something that they didn’t have to worry about being on a public record forever. We chose the stories format because it was understood because so many platforms has adopted it from Snapchat, but it wasn’t really a fit. And it caused a little bit of confusion between leaders and general. So in solving that problem, I think we can do a much better job.

And I think we can do it with the format that is unique to Twitter, which is important because it will help grow a lot more of our ecosystem instead of just playing catch up with the format. It’s constantly evolve based on visual cues rather than like really going after the jobs that we’re trying to solve. So we wanted to make sure that we’re acting without hesitation when we see something. Not exactly a fit. We could have kept it for many more years and made it work, but I’d rather spend the time on stuff that is going to be very unique to Twitter and will really move the needle for us and all that.

Speaker 3: (38:00)
Deepak, I’d just add, we don’t need Fleets in order to use more of the screen to help advertisers connect with their customers. And so when you see us testing ad formats, you should think about the broader opportunity we have to leverage that innovation in other ways to help advertisers. And we’re excited about how that can play out in the coming quarters.

Speaker 4: (38:24)
Your next question comes from Rob Sanderson with Blue Capital. You line is open.

Rob Sanderson: (38:31)
Yeah. Thanks. Good afternoon. And thanks for taking my questions. This is for Ned. Ned, I want to maybe dig a little deeper on your revenue durability efforts, specifically the business models around some of the new opportunities here. So I’m understanding about the starting line, of course, and just looking for help framing the longer term opportunities.

Twitter Blue, it seems fairly obvious, but the new products for creator monetization. So we assume [inaudible 00:38:59] how we think about the potential here in the Pacific and things like gifting are very significant revenue contributors to the Chinese social, where people obviously want to compensate great services. So we think about that and the revenue impact of these types of new products in a scale over time. And kind of along these considerations, do you think these things would have fairly marginal costs, assuming they’re both on a net [inaudible 00:39:34] kind of framework can you provide, again at the starting line here, just to think about just the business model considerations as some of these services hopefully catch and grow meaningful contributors over time.

Ned Segal: (39:48)
Thanks, Rob. That’s a great question. I think the most helpful framing would be for you to consider that if we’re creating the value, then the customer would be paying Twitter and the value would accrue to us. This would be for something like Tweet deck or the features that we’ve put in Twitter Blue, which will continue to evolve as we test and learn. If the creator is creating great content and you see it in super follows, or it’s just a Tweet and somebody puts money in their tips jar, or it’s long form content that we include in a different price point for a subscription without ads, that’s complemented with other features that come from us, then we would make sure that part of the value that can be attributed to the creator where those dollars go to them.

Ned Segal: (40:35)
And when we’re facilitating a transaction, if we do that, we’re going to help creators build and nurture and grow their follow base on the service. They’ll continue to create great free content and they will also create great paid content as well. And if there’s lots of good things happening on Twitter, there’ll be great ways for us to monetize the service, whether it be ads, subscriptions, or otherwise. So think about helping creators as a way to make sure there’s great content on the service and to make sure that those creators get paid and that they can find their customer base and think about the other services where we’re providing the value as a way for us to exchange value with the customers then.

Great, helpful.

Speaker 4: (41:28)
Your next question comes from Brent [inaudible 00:41:31] with Jeffrey’s. Your line is open.

Brent: (41:34)
Thanks, [inaudible 00:41:36]. Just on pricing, I’m curious if you could just frame first half versus second half and your expectations on overall pricing and anything surprising you that maybe you didn’t see in your crystal ball, a quarter back.

Ned Segal: (41:53)
Thanks, Brent. First on the crystal ball, which we have one, we definitely incorporated too much of the beginning of the quarter into our guidance when we got it for Q2, where we got off to a slower start in terms of brand in January, February. In March, we saw strengths and we equal-weighted them in the guidance. And that strength for March really continued throughout Q2. So much for the crystal ball.

Ned Segal: (42:24)
On the second part of your question about pricing, there are lots of different factors that play into pricing. And so, as you’ve seen in the past with us, you go back to 2018. As an example, there are times where cost per engagement can go down dramatically and revenue growth can be pretty significant. And I point that out because as you think about the mix of brand versus VR, as you think about what the threshold is for something to be a click, we’re actually at the point where of the videos that you see on Twitter in ads are 15 seconds or less. It’s taken us a long time to get there. The likelihood that those… That we end it, that we get paid higher than it is for longer videos, typically.

Ned Segal: (43:10)
This is a great example of something that can throw a wrench in comparables when you look at ad engagements or cost per engagement. And so, I focus less on the pricing and more on the return on investment for the advertiser. And when we’re improving the age-based targeting, location-based targeting, improving the formats, growing the audience. And hopefully, over time continue to see a mix shift towards VR from brand that there are lots of ways that that can play out well for advertisers. Some of them include pricing being higher, but others where pricing’s meaningfully lower, and they’re just getting more reach and more return and therefore invest even more against our growing audience.

Brent: (43:53)
Thank you.

Speaker 5: (43:54)
Thank you. And I think we have time for just one last question, please.

Speaker 4: (43:58)
Your last question comes from Mark [inaudible 00:44:01] with Alliance Springsteen. Your line is now open.

Mark: (44:05)
Great. Thanks for fitting in the question. And just a quick follow on to that last answer. I think in the shareholder letter, exceptional momentum was referred to. And if we think about ways to dimensionalize that, is it a lot of it up runs and these advertisers coming back with events? IS IT some of these new formats that are appealing and growing share of wallet, or is it new advertisers coming onto the platform for the first time ever? Any color you can share?

Ned Segal: (44:37)
It’s a lot of those things that’s driving the momentum. It’s been less about new advertisers and more about growing our share of wallet and those advertisers spending more than they had in previous periods broadly, and hopefully as well on Twitter. Over time, we do think we can grow the number of advertisers on our service. So it’s because we can show a credible value proposition to lots of medium size advertisers who haven’t historically advertised with us, where our sales team can continue to do a great job growing the dollars spent by some small businesses, but also where the work we’re doing around topics, the work we’re doing on quick promote, the work we’re doing to make it easier to buy ads and see the return from those ads for small advertisers will help us meaningfully grow the number of advertisers.

Ned Segal: (45:25)
There are millions of small businesses on Twitter today, but most of them don’t yet advertise because we haven’t made a good case to them what the value proposition is or made it easy for them to do it. So I think the benefits of growing the advertiser base are in front of us. And the strength that we’re seeing today is about that larger audience with better ad formats, with more relevant macro-economic backdrop of events coming back, more product launches, and a lot of that to come in the second half of the year as well.

Speaker 4: (46:03)
Back over to Ned [inaudible 00:46:05] for closing remarks.

Ned Segal: (46:08)
All right. Thanks for joining us, everybody. We appreciate your interest in Twitter, and we look forward to speaking with you next quarter, when [inaudible 00:46:16] 26 after the market closes. Until then, we’ll see you on Twitter.

Speaker 4: (46:25)
Ladies and gentlemen, thanks for participating in today’s program. This concludes the program. You may all disconnect. Have a good day, everyone.

Twitter TWTR Q2 2021 Earnings Call Transcript

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