Twitter TWTR Q3 2021 Earnings Call Transcript

Speaker 1: (00:00)
Good day, ladies and gentlemen, and welcome to the Twitter third 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. I’d now like to turn the call over to your host, Krista Bessinger, VP Investor Relations. Please go ahead.

Krista Bessinger: (00:24)
Hi, everyone, and thanks for joining our Q3 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 #TWTR. During this call, we will 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 to 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: (02:02)
Hello, everyone. Thank you for joining us with a few highlights from me and Ned before we get to your questions. We had a solid Q3, with strong performance across revenue products and continued audience growth. Revenue was 1.28 billion in Q3, and we continue to see significant ad revenue growth, which increased 41% year over year this quarter. Average monetizeable DAU increased to 211 million, up 13% year over year, with growth accelerating from an increase of 11% year over year in Q2. Before we get deep into the quarter and how we’re looking at the rest of the year, as you may have seen, we announced that we agreed to sell MoPub to AppLovin. First. I want to thank the MoPub team for all their hard work and contributions to Twitter and our customers who put trust in us and the MoPub team for many years. The sale demonstrates our confidence in our core revenue product strategy, allowing us to refocus our energy and resources on our direct response. That’s going to be in commerce roadmaps.

The last time we talked, you heard us talk about our intention to build an ecosystem of connected features and services focused on serving three core jobs, news, discussion, and helping people get paid. In Q3, we launched products across all these categories, including ticketed spaces, tips, super followers, and narrow casting with communities. We also added the ability to pay your favorite creators using a variety of payment methods, including for the first time Bitcoin. We continue to upgrade our machine learning systems as well, which are improving personalization throughout the product. We’re just getting started, but already, Twitter feels more responsive and intuitive. Lots more to come here. As we press to the end of the year, we feel confident about where we’re headed. Overall, we’re on course to leave 2021 a more focused company with clear priorities. With that, I’ll pass it over to Ned.

Ned Segal: (04:00)
Thanks, Jack. Q3 was a solid quarter, driven by focus and execution. Total revenue grew 37% year over year, at the high end of our guidance. MDAU grew 13% year over year to 211 million, with U.S. MDAU essentially flat quarter over quarter and up 4% year over year, both in line with our expectations, due to the unusual comps from the pandemic surge last year, coupled with typical seasonality. We expect total MDAU in Q4 to grow at or above the Q3 rate of 13% on a year-over-year basis. And we continue to believe the low point for year-over-year MDAU growth in 2021 was back in Q2 due to those tough cops. The impact of COVID remained fragmented across the world, and we believe consumer behavior has yet to normalize. Despite these uncertainties, we remain optimistic given our healthy top of funnel, our conversion rate and our product roadmap, which allow us to serve more and more people every day. Let me share some of the highlights from the Olympics and our DR roadmap from Q3. The Olympics were a strong event for us. Olympics related tweets with video content were viewed more than 1 billion times on Twitter. There were 76 billion tweet impressions related to the Olympics, and 12 of the 14 official Olympic sponsors advertised on Twitter. Our shift to direct response ads also made great strides. For mat advertisers, we launched an updated learning period model that delivers more consistent campaign performance. And for website clicks, we introduced a multi destination carousel to enable advertisers to market and drive traffic to multiple products inside the same ad on Twitter.

Ned Segal: (05:42)
These are just a few examples of our accelerated pace of testing and rolling out new features, yet we won’t stop there when it comes to increasing focus on our most critical work. As Jack mentioned earlier, and although it happened in October, it’s worth spending a moment on the announced sale of MoPub. The sale of MoPub positions us to reallocate resources and accelerate product development by investing more in the teams focused on better monetizing our website and apps. The sale’s expected to close in Q1, and while the associated product, engineering and go to market teams are largely expected to shift to DR, SMB and commerce upon closing, it will take time for their work to deliver results. We do not expect to recoup the full revenue loss associated with the sale of MoPub in 2022, which is estimated to be between $200 million and $250 million.

Ned Segal: (06:31)
Despite some expected 2022 revenue loss, there are no changes to our goal of generating 7.5 billion or more of annual revenue in 2023, with our increased focus and additional resources working on increasing our market share and the $150 billion in growing addressable market for ads on Twitter. I’ve also noticed there’s been a lot of focus more broadly on the impact of the supply chain on the economy in general and advertising in particular. I’m pleased to share that our launch and connect value proposition continues to resonate with advertisers across the economy, with not well more than half of our total ad revenue year to date associated with services and digital goods.

Ned Segal: (07:11)
But then we also spend a moment on ATT. We continue to see opportunities around personalization on Twitter, as we better leverage our unique signal to improve people’s experience and show them more effective ads across both brand and direct response. The revenue impact we experienced from ATT in Q3 increased on a sequential basis, but remains modest. The impact of ATT is likely to vary across ad platforms, given the unique mix of ad formats, signal and remediations on each as well as other factors. The mitigations we put in place and the speed with which we’ve adopted new standards, like the SKI network and resulting changes across our technical stack have contributed to minimizing the impact to us. Since the launch of ATT in April, we’ve invested in supporting the SKI network, opening up 30% plus more inventory and scale on iOS and launched support for view through attribution and SK campaign ID management features in the Twitter ads manager.

Ned Segal: (08:10)
It’s still too early for Twitter to assess the long-term impact of Apple’s privacy-related iOS changes, but the Q3 revenue went back was lower than expected, and we’ve incorporated an ongoing, modest impact into our Q4 guidance. We’ve seen our revenue product development, both related to and distinct from ATT, improve the performance of our products, and we expect that to continue. Let me quickly turn to a couple of points regarding our outlook. We continue to expect total revenue to grow faster than expenses in 2021, excluding the litigation settlement announced in Q3, and we expect to continue our investment posture as we enter next year. We’ll talk more about 2022 in February, but let me provide a little more context here. Our 30% plus headcount growth in 2021, with annual merit increases and other investments we’ve made in 2021, including our new data center, will flow into annual expenses for 2022, likely resulting in a mid 20% increase in total expenses next year, prior to hiring any more people or additional investments during 2022. We’re pleased with our Q3 results, and we’re excited about the momentum we bring with us into Q4. Let’s go to questions.

Speaker 1: (09:20)
So attendees who would like to ask a question, simply press star, then the number one on your telephone keypad. Again, that is star one. We’ll pause for just a moment to compile the Q&A roster. Your first question is from Doug Anmuth from JP Morgan. Your line is open.

Doug Anmuth: (09:43)
Thanks for taking the questions, I have two. First for Jack, how do you think about the path to returning to 20% growth in 2022 and ’23? And which of the new products do you think will be most impactful here? And then secondly, Ned, just on your comment you just made just about the increase in expenses. So just to make sure we’re understanding it right, you’re kind of saying the expenses ending ’21 will take you to a mid 20s percent increase flowing that through before you even hire anybody or add additional expenses. So that’s a number that you’ll update in three months? Thanks.

Yeah, just to take the first question, our greatest opportunity and potential for growth is around personalization and relevance. That is where we’ve consistently gotten the greatest gains in everything that we do. And we intend to put a lot more emphasis here. This mainly speaks to our application of machine learning and in general, AI across every product surface that we have, but it also lends itself into some of the newer product surfaces and capabilities that we’ve been talking about, some far longer, some more recently. Topics and interests continues to be a highlight. We have close to 12,000 topics now, 11 different languages, 239 accounts follow at least one topic. We’re putting this closer and closer to onboarding, but this helps everything. This helps our experience, consumer experience. It helps our business because it gives us signal with a ton of intent, in expressing intent around a particular issue or topic instead of us having turned for it. And it also lays the foundation for the products that we want to create. So Spaces is an example of this, which we just rolled out to 100% of all of our customers. Communities, which is the narrow casting use case-

… communities, which is the narrow casting use case, allowing people to talk specifically in what feels like a much smaller room about a topic interest. And that could be a location with my neighborhood. I think we will definitely see a lot of usage as people find new ways of having conversations that don’t feel like they’re tweeting to just the entire world and broadcasting it, but actually have a much tighter feedback loop because they’re talking about something that is locally interesting, whether that be a particular interest or it actually be a location, a geography. So those are the ones that I would point to, but the biggest impacts will continue to be personalization and this is an area where we feel we are behind. Although we’ve gotten a lot of gains from it, that just really speaks to the potential. We have so much more work to do in terms of the machine learning and just generally applying AI to every surface area that we have.

Ned Segal: (13:08)
Hey, Doug, just to add a little bit to that and get your question on expenses, the top of funnel continues to be healthy all around the world for us. That is the folks who haven’t been on Twitter for a month or more, whether they’ve never been on Twitter before or they’ve tried it in the past but haven’t made it a part of their daily ritual. So all the product stuff that Jack took you through plus that healthy top of funnel and all the events and topics that continue to bring people to Twitter all over the world, those are the components that build us up to that 315 million number for the end of next year. When we put it out there in February remember, we knew that this was going to be the year where we’d be lapping last year’s pretty incredible growth and that an acceleration was required. And so we now started that with 11 from Q2 going to 13% DAU growth in Q3.

Ned Segal: (13:57)
The second part of your question on expenses, so we’ll give more color around 2022 in February as we do typically do. But we just want to remind everybody, one, our investment posture hasn’t changed. And as we mentioned back in February, as long as we’re on track for our goals, we’re going to continue with the mindset to invest to drive growth. And when you just do the math on the hiring and investment decisions that we’ve already put to work, whether it’s the data center or people who’ve already joined the company, that when you roll those through the P&L for a full year, you add in merit increases and so on, you naturally get to, and this includes depreciation for the data center, for example, which doesn’t start until you actually start to use the data center, you naturally get to the mid-20s.

Ned Segal: (14:44)
And so we’re in the middle of the process where we sort out all the things that we want to do next year, so I don’t want to get in front of that, but we do want to continue to invest to drive growth next year and anything else that we decide to do that isn’t a resource reallocation decision would be on top of that.

Doug: (15:10)
Great. Thanks for clarifying.

Speaker 2: (15:11)
Your next question is from [Justin Post 00:15:11]. Your line is open.

Justin Post: (15:11)
Great. Thank you. Would love to talk about progress you saw in the quarter with the MAP product, and I guess you’re enabling shopping. So maybe talk a little bit about that and how you see the opportunity. And second, you guided to 25% quarter over quarter growth at the high end, which is pretty good comparatively. Are you expecting the MAP product to contribute better growth than overall in Q4? Thank you.

Ned Segal: (15:41)
Hey, Justin, a couple things on the revenue product side. First, we were pleased with our progress on MAP. A couple ways to show it. One is MAP grew slightly faster than overall ads, which gives you a sense that we’re continuing to make progress there. We saw strength from some areas where we haven’t always seen it in the past, such as true travel, where launch campaigns as people begin to travel again from the travel advertisers grew 40%. A lot of that’s tied to MAP. FinTech, they grew their spend 200% year over year with us. Food delivery, where a lot of that’s pointing people to apps, that grew 140%. That you’ll give you a sense where some of the strength is coming from. You mentioned shopping. So we now have business profiles to differentiate businesses from your account and mine on Twitter, where you can put your hours of operation, you can put your website. We will also make it so you can buy products straight from those profiles. So stay tuned for that. We’ve been experimenting with that over the course of this year.

Ned Segal: (16:44)
Also, on the direct response side, the multi-destination carousel is improving click through rates by 20%, which gives you a good sense for why this is attracting more and more advertisers and more and more dollars to our service. So we’ll keep marching down that roadmap, and with the sale of MoPub, we’ll have more resources to put against it. Your second question around revenue guidance, so if you back out last year, which was by no means a normal year, and you look at the four prior years, you see sequential growth in Q4 for us, that was from the mid-teens to the mid-20s. And so when you compare this to that 1.5 to 1.6 billion range, you can see that that’s reasonably consistent with what we’ve seen in the past. We feel like we’re entering Q4 with the wind at our backs, with the Olympics having got us off to a strong start in Q3.

Ned Segal: (17:41)
The Olympics went a little bit better than we had expected them to. From a revenue perspective, we were really pleased with how we were able to deliver for advertisers, and the strength continued throughout the quarter across geographies, across formats, across verticals, and with a great event calendar with lots of product launches in front of us. With that strong mix of services and digital goods that we talked about earlier, we feel like we’ve got a lot of momentum at our backs right now.

Justin Post: (18:06)
Great. Thank you.

Speaker 2: (18:09)
Your next question is from [Rich Greefing 00:18:11] from [White Chart Partners 00:18:12]. Your line is open.

Rich Greefing: (18:15)
Thanks for taking the question. I want to think about a follow-up on Doug’s question at the beginning. As you think about the interest graph and Jack’s comments about understanding intent, and I guess not just focusing on topics but as you think about topics and shopping and signing up for newsletters, review, commerce that you’re starting, how does all of this play to your longer term positioning on privacy changes? And I’m not even just talking about iOS 14, but if you think about what Apple could do in the future, Google’s looking at cookie changes, how does all of this translate? Are you using any of it really yet to really target ads? Where are you in that process? And as you think out at the next few years, how exposed are you to outside changes versus being able to leverage on platform first party data to target advertising effectively? Thanks.

Yep. Hey, Rich. Relative to the signals we can get from it, it’s quite small in terms of what we’re using today. Privacy is about making sure that people have an understanding of what data is being collected about them, having control over that. We want to make sure that we’re leading our peers in exactly that but also making sure that we have much more direct ways of people telling us what they’re interested in and being able to follow a topic and interest is one such way. Being able to join a particular community to talk about an interest or topic is another way. These are all things that people are intently opting into saying that they’re interested in this particular thing and gives us a much, much stronger signal. It also gives us new surface area to consider what we can do with communities, which hasn’t launched fully in beta yet. We’re testing it internally.

But it gives us the surface area for advertisers who may just want to be shown around a particular topic instead of more broad based in home timeline. So it gives them a much safer space if they want to avoid particular topics or anything that might be political or not. And they have the ability to act on more intent, not just the people that they’re trying to reach. So that’s ultimately what we want to drive and it starts with the product itself and then making sure that we utilize those signals to deliver a person, an individual, the most relevant ad or introduction to a product or service that they can imagine. And they’ll tell us whether that’s valuable or not as to whether they tap on it or purchase something. And all these things give us more information so that we can create a much tighter feedback loop so that all these actions can positively reinforce one another.

So everything from spaces to the newsletters to following topics, all these things show a particular intent and a particular interest, and we have to depend less and less around inference in order to strengthen our relevance and get better signal.

And where are you in terms of, and you said you’re still in the very early days of using this data or not using very much of it, how do we think about over the next couple of years leveraging that intent data and user data to drive ads? Is that a ’23 event? Is it longer? How do we just think about over the next couple years when we start to really see the benefits from that?

Yeah, I mean, I think one of our biggest priorities in the company right now is personalization. So we’re going to put a premium on finding all the right signals to make sure that you’re not just seeing more relevant ads but you’re seeing more relevant tweets as well. These are very similar systems so I don’t think it’s all that far off in that we can start using more and more of these signals to increase the relevance of what we show. But this is the greatest opportunity for us in terms of relevance, and that drives everything from growth and usage, but also to our advertising business.

Thanks very much.

Thank you.

Speaker 2: (22:57)
Your next question is from Mark Mahaney from ISI. Your line is open.

Mark Mahaney: (23:02)
Okay, thanks. I just want to ask about unlocking small and medium size business customers. I know you’ve stated that it’s a relatively small part of your advertiser base now. What do you think are the two or three things you need to do to really unlock that advertiser base? How easy is that to do, I’m sure it’s not easy, but the length of time it takes to do that? What do you think are the major reasons why they’re not as engaged with you as they should be? Thank you.

Yeah, I think there’s a number of things here. One is that we do have a lot of small businesses on Twitter, but we have not served them well both in terms of the products and also the advertising capabilities. DR is a big part of this making sure that we continue our move towards more and more performance based advertising. Self-serve is a big part providing an intuitive interface where a one person small business or sole proprietorship can actually come onto our system and understand-

… can actually come onto our system and understand how to reach the customers that they’re trying to reach. And then there’s a bunch of product surface areas that I think make this better. The topics that I keep talking about includes locations as well. Now we have even my hometown of St. Louis, Missouri as a topic I can follow, and again, that’s intent that we’ve been using to signal. Communities is going to be a big part here as you consider topical communities, interest communities, and also communities focused around particular locations. That’s going to be an incredible surface area for small businesses.

So there’s some foundational work in terms of the performance direction that we’re moving to, but also making sure that we are building something that ultimately is self-serve for a small business. They can open up a website and get the advertising right away and actually see value in it immediately, which means that they’re really crisp and intuitive [inaudible 00:25:04]. And then the more and more capabilities we have through the products including our aspirations around commerce. That helps with retaining and attracting new small businesses as well. We have been launching some things recently like the business profile, and there’s a lot more to come. But all of these things will help the smallest of businesses be able to utilize us and scale up as they make more and more sales.

Ned Segal: (25:35)
Thank you.

Speaker 3: (25:38)
Your next question is from Ross Sandler from Barclays. Your line is open.

Ross Sandler: (25:43)
Hey, one for Ned and then one for Jack. Ned, the U.S. ad revenue looks really good in the third quarter, plus 15 Q on Q, ahead of what Facebook and Snapchat reported in their U.S. business. So is that Olympics or other factors? And do you think you’re potentially picking up a little bit of share from these folks who are having much more significant problems around iOS 14? And then Jack, the shop module, just to follow-up on that last question, that looks pretty interesting. Is this mostly, this eCommerce initiative, a self-serve process to get smaller businesses? How do you guys tap into some of the larger e-commerce advertisers that are out there that are spending tens of millions of dollars or hundreds of millions of dollars? Is there a big outbound effort in sales to tap into that? Just any color there. Thanks a lot.

Ned Segal: (26:42)
Hey, Ross, first on the U.S. ads revenue. So we are really pleased with how we performed in Q3 in the U.S. in particular. A part of it is the Olympics, which we think went better than we had expected by a little bit. And a lot of that shows up in the U.S. Certainly, not all of it though. But as events began to come back, as people went back to stadiums, as they went back to theaters and other places, they continued to use Twitter and advertisers continued to use Twitter as a way to reach them. Whether it’s the two billion impressions we saw during the video musical awards or the 76 billion impressions we saw during the Olympics, these are just great examples of that in helping advertisers connect with their customers around a full baseball season in the U.S., around the lead up to the football season, both pro and college, and all the highlights that we’ve got with every touch down now during the NFL and a lot of the commentary around this.

Ned Segal: (27:41)
Those have been great opportunities for us in the U.S., but they’re just some of the examples of what we’ve seen. And when we look at places like Japan, which grew 20% year over year, it’s a powerful reminder that different economies are coming out of COVID at different times and went into lockdown at different points. And so, although the year over years are going to be wonky for one reason or another, there’s still lots of opportunity for us in other geographies where we have a sizable audience and great relationships with advertisers. Japan, as MAP continues to improve, as they gradually come out of lockdown, we see lots of opportunity there just as another great example of where there’s geographical opportunity for us. I’ll turn to Jack on the second part.

And commerce is an area where we want to start small and scale, so we want to make sure that we are building a great product that people want to stick with. And right now, the opportunity is around smaller, but that doesn’t limit us later on from much, much larger retailers and brands. I also think there’s a lot of opportunity to partner a lot more so that people who already have e-commerce solutions up and running with their inventory and tied to potential legacy systems where a lot of larger retailers have constraints around that, that there’s just one tap or one click to turn it on and turn that inventory onto Twitter as well. So we want to make sure that we’re first and foremost building great products and then we’ll look to scale it and then turn on more of the sales engines, as you mentioned.

Speaker 4: (29:29)
Great. Thanks, Jack. And we’re going to take the next question from Twitter. It comes from the account of [Olivier Kaza 00:29:36]. And he asks, “How does crypto fit into the global strategy at Twitter now? How has tipping and subscriptions monetized so far?” And he also asks about the progress at review so far?

Well, so we just turned on Bitcoin tipping for tipping products. Before, we had a number of third party services that people could use to receive tips. What makes Bitcoin interesting is that it is globally accessible. It doesn’t matter where you are in the world. If you have a Bitcoin address to receive and you have Bitcoin to send, specifically over the Lightning Network, you can do it. So it really opens up the aperture of who can participate instead of having to go market by market and look for services that operate with a bank that’s in each one of those. It gives us much more speed. Both tipping subscriptions are new. These are products that we want to make sure that, again, we’re starting small and we figure out the right product that people want to stick with and they’re valuing every single day. And then we’ll roll them out to more and more people and scale it and continue to iterate on the product.

The progress of review, which is our newsletter product, it’s a reminder of why we did this. We want to make sure that Twitter is a place where you can express yourself in multiple formats, whether that be through short format updates like tweets, spaces, which is an audio conversation in real time, for long form, which is review in the newsletter. The more we integrate this, the more opportunity and potential that we see. I think rather than looking at any one part of the equation though, it’s useful to consider the ecosystem. Someone being able to tweet out that they’re going to host a space, add an admission price for that space, which is what we call ticketed spaces, and host the space, potentially be able to sell a product to through our commerce initiative, and then after the space is complete, writing a newsletter to all their followers around when or a recap or any instant insights.

All these things positively reinforce one another and allows people to reach in entirely new ways. Some people might not be able to see a space, but they can get the newsletter, [inaudible 00:32:19] back to the tweets, and so forth. So we’re focused on the ecosystem model, the connection between the parts as being the strength, not the individual aspects of it and making them the strongest, but actually the connection between is where we think the greatest value is going to come from.

Speaker 4: (32:42)
Thank you. Operator, take the next question, please.

Speaker 3: (32:46)
Your next question is from Eric Sheridan from Goldman Sachs. Your line is open.

Eric Sheridan: (32:51)
Thanks so much for taking the question. I want to come back to a couple of the topics we’ve talked about before. Is there any way to size the brand advertising upside you saw and separate that out between the U.S. business and rest of the world in terms of where some of that brand advertising strength was derived from? And maybe the same element with respect to direct response. When we think about what you’ve built so far to date as a revenue mix component in the business, how much of that is located in the U.S. business versus more widely distributed globally? And how should we think about that evolving in the years ahead? Thanks so much.

Ned Segal: (33:26)
Hey, thanks, Eric. So remember back at the Analyst Day we mentioned that we had been 85/15 brand DR in terms of ads on Twitter and that the longterm goal is to get to 50/50. We said it wouldn’t be a straight line to get to 50/50 because, for a variety of reasons, we could see brand outperform DR in any given quarter or in any given year. But we think that over time that’s the right mix for Twitter to be at. We feel like we’ve made really good progress having rolled out a new version of MAP, having made a bunch of improvements to website clicks including the carousel that we talked about earlier. But it’s just not going to be a straight line from here to there.

Ned Segal: (34:03)
When you look across geographies, there are some that are inherently much heavier in one product or another. Japan being a heavier MAP market is a good example of that. Europe tends to be more MAP heavy as well. But a lot of this can change from one period to another, from one advertiser’s campaign to another, based on our product roll outs and improvements that we make. So we’ll update that 85/ 15 mix annually, the next time will be in February, and between then we’ll just continue to give you highlights and give you a sense for all the progress that we’re making.

Eric Sheridan: (34:40)
Thanks, Ned.

Speaker 3: (34:43)
Your next question is from Colin Sebastian from Baird. Your line is open.

Colin Sebastian: (34:49)
Good afternoon. Thanks very much. I guess, first off, I think in the letter maybe you mentioned that the uptake with topics and communities has been quite strong with new users. Just wonder if you could talk about the pace of adoption among existing or legacy users as well opting into those newer features. And Ned, just one follow-up on the expense outlook. I don’t know how many people you’re retaining from MoPub, but just curious, how much of a normal hiring year that, that amount of head count might offset as we’re looking at 2022? Thanks.

Yeah. On topics, we launched 2300 new topics in the quarter. There’s still a lot to do in terms of applying machine learning and personalization to it, both in terms of being able to open up new topics much faster, but also enabling more relevance around the topics. A lot of the tweets that I find most valuable these days are right in the home timeline and they’re introduced by-

And they’re introduced by following topics or a related topic that the system thinks I’m interested in. So I’ve discovered a ton that I wouldn’t otherwise from just following accounts and doing all that work. So, we do think it’s really helpful both in terms of retaining current users and giving them more of a breadth of what Twitter offers. And also, we’re starting to put it more and more into onboarding. So, we do think there’s going to be a lot of momentum from that. However, I would say that our experience around it, the UI and just how to navigate it and understand it is still a little bit old.

And the more work we do to make it feel more cohesive, make it feel like a less taxing browse experience, being able to show and demonstrate tweets right there or a selection of tweets that you might see if you follow a topic would, I think, help a lot. So right now we’re looking at the interface more cohesively. And now that we have the core infrastructure working, it’s just creating a much better experience from a UI perspective.

Ned Segal: (37:29)
The next part of your question on … Sorry.

Speaker 1: (37:33)
Pardon me for interrupting, sir.

Ned Segal: (37:36)
No problem. The second part of the question was on MoPub. I’ll just start around the expenses. So Colin, the thought is that we will re allocate as many people as we can, a lot of whom will remain at Twitter from MoPub to SMB to commerce to DR more broadly that many of the go to market people will move to other parts of our sales organization and it will take time for their work to turn into revenue. So we don’t expect to recoup all that 200 to 250 million, but we do think that over time we can get back on track towards that seven and a half billion or more goal for 2023.

Ned Segal: (38:18)
And that will be on a more solid ground with more focus around monetizing Twitter than we had been before. And so from an expense perspective, this really doesn’t change the picture for next year because we hope to have as many of those people as possible remain at Twitter, of course, some will be going with MoPub, but most will be staying with us and moving to other work around monetizing Twitter.

Speaker 1: (38:48)
Your next question is from Maria Ripps from Canaccord. Your line is open.

Maria Ripps: (38:54)
Great. Thanks for taking my questions. Can you just elaborate on what Twitter did with SKI Network that made it more effective for you compared to snap? That seemed to say that it was not as effective of the initial testing. And then secondly, in the shareholder letter, you mentioned that you made it easier for new customers to sign up or login with their Google account or Apple ID. Can you just maybe talk about whether that was a noteworthy contributor to user growth in the quarter?

And how do you sort of see the functionality supporting your efforts around user growth and engagement going forward?

Ned Segal: (39:30)
Thanks, Maria. So first on SKI Network, it’s hard for us to speak to what others have done. And a lot of this is that we’re coming at these things from different angles. And so we continue to work hard to give advertisers reporting at whatever level customers allow us to around the success of their campaigns. And the SKI network did a couple of things for us. One is it opened up more inventory where we hadn’t been able to report to advertisers on how their campaigns had done before, and we are now able to show 30% iOS customers ads and then report on them on an anonymized aggregated basis.

Ned Segal: (40:06)
Two is that we’ve worked hard to help the measurement partners have access to SKI Network and did this early enough to make sure that people could benefit from it. And advertisers can use that to the best of their abilities. There’s just a lot of signal, both from showing ads to people and also reporting on how campaigns have performed on Twitter historically, where there’s been room for us to improve. And so I think the fact they’re all coming at these things from different angles maybe we implemented different times, maybe the campaigns that we’re pull reporting on are different as such that this ATT has had less impact on us than perhaps it’s had on others who have a different mix or starting from a different starting point.

Ned Segal: (40:48)
The second question around single sign on. We’re looking at all the ways that we can reduce friction and helping people get to what they’re looking for on Twitter as quickly as possible. Single sign on is a great example of it where a lot of people created accounts on Twitter over time, but they may not remember their password, or it may be on a different device. And everything we can do to get them into a timeline as quickly as possible, or to help them find the conversation that they were looking for as quickly as possible, we want to do.

Ned Segal: (41:16)
This has been a nice contributor and something that should continue to reduce friction over time for us given how our top of funnel work. For a lot of the people who come to Twitter have been on the service before they just haven’t been on it for a while and every new at bat we get with them is an opportunity to show them how much better Twitter is than the last time they were with us. So a single sign on is a great example of that. Jack talked about topics as another important lever.

Ned Segal: (41:41)
As those get closer and closer to onboarding, we’re able to help people find the accounts that they want to follow, or the topics that they want to learn most about through the process of showing them topics and refining what accounts we suggest to them, refining what topics we suggest to them and get into value in their timeline faster than we were able to before.

Great. That’s very helpful. Thanks so much for the call.

Speaker 1: (42:09)
Your next question, Brian [Nowak 00:42:11].

Speaker 5: (42:13)
Apologies, operator. I’m sorry. I think we have time just for one last question. So we’ll make this the last one. Thank you.

Speaker 1: (42:17)
Your last question is from Ryan Nowak from Morgan Stanley. Your line is open.

Brian Nowak: (42:24)
Great. Thanks for squeezing me, y’all. Just, I wanted to go back on performance, direct response and sort of the ATT situation. Can you talk a little bit about how you’re thinking about the next couple years of performance in DR? It seems like in order for the business to get to be half of your revenue, it’s going to be pretty sizable. So what investments are you making or do you see yourself making in ’22 and ’23, just to sort of minimize any potential disruption from AT&T signal loss and other Apple changes they’ve already made, or you already have the technology in place?

Just kind of think about the straight line.

Ned Segal: (43:07)
So Brian, one, because we have a smaller DR business and we’re trying to grow it over time, there is a signal that we’ve been leveraging perhaps to the same extent as others that we’ve lost. A lot of this is opportunity that’s in front of us. Whether it’s the right to show people a more personalized experience on Twitter by asking their permission to do so after having built trust with them through how we show up as a company and how their timeline works and giving them the ability to turn off the algorithm at the top right of the app or other things that we do.

Ned Segal: (43:41)
Secondly, there’s that signal that Jack was talking about earlier that we typically, or historically just haven’t leveraged as well as we can to show people map ads, to show them website click ads, to help them buy products or goods and services on Twitter. So it may just be that there’s a lot of signal that is unique to Twitter that we haven’t done as good a job of leveraging in the past as we expect to do in the future. And with additional resources, with focus on monetizing Twitter and with the DR roadmap that we’ve laid out and talked about over the last few quarters, we’re optimistic that we can continue to improve relevance of ads on Twitter, be it brand or DR relative to where we’ve been in the past.

Great. Very clear. Thanks, Ned.

Ned Segal: (44:30)
Thanks, Brian.

Speaker 1: (44:31)
Thank you. And that does conclude our Q&A session for today. I’ll turn the call back to CFO Mr. Ned Segal for any additional or closing remarks.

Ned Segal: (44:40)
Okay. Thanks for joining us, everybody. We appreciate your interest in Twitter. We look forward to speaking with you next quarter when we report Q4 on February 10th after the market closes. Until then, we’ll see you on Twitter.

Speaker 1: (44:54)
Ladies and gentlemen, this does conclude today’s conference call. Thank you for your participation and have a great day.

Twitter TWTR Q3 2021 Earnings Call Transcript

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