But there are some notes of concern, particularly in regards to rising costs. First off, here’s Twitter’s current mDAU (monetizable daily active users) chart:
Twitter’s a little slippery with the way that it presents its data, in only providing a direct comparison to Q4 2019, which makes the results look better. But for broader comparison, here are the previous four quarters of Twitter’s mDAU stats.
As you can see, Twitter added 3 million more mDAU in ‘International’ markets in Q4, along with one million in the US. So it actually, seemingly, added four million users total in Q4, not five, but a mathematical anomaly in its Q3 results seems to have confused things.
Regardless, that growth rate is steady enough, but not exactly setting the world on fire, and that could be a concern when you also consider that Twitter may have just passed its peak interest point. Former US President Donald Trump used Twitter as his primary social network of choice, which should have brought more people to the platform more often. If it did, it didn’t contribute significant numbers in the US market.
For comparison, Twitter’s 27% YoY increase in active users is better than Snapchat, which posted a 22% YoY increase in DAU last week, while Pinterest saw a 37% increase in monthly active usage. Based on these figures, Twitter is not way out of line with industry trends, and 2020 was a difficult year to measure. Hard to tell, then, how much of a concern this element might be.
In terms of engagement, Twitter says that it implemented new elements to significantly improve content personalization and discovery within people’s first few days of either activating or re-activating their Twitter account. Improving discovery has been a key focus as Twitter looks to attract more users – and long that line, Twitter also expanded its selection of topics users can follow, as opposed to profiles, while also seeking to better personalize topic recommendations.
“These improvements drove a meaningful increase in the number of Tweets liked by customers who followed a Topic, with average engagement rates for topical Tweets more than 2X the engagement rate for Tweets from account-based follows in Q4.”
Interesting that Twitter refers to users as ‘customers’ here. If you ever wanted to know where you stand in Twitter management’s eyes…
Which brings us to revenue – as noted, Twitter brought in a record $1.29 billion in Q4, up 28% year-over-year.
As you can see, Twitter’s revenue growth between the US and International markets was pretty much split down the middle, with neither taking a significant lead in driving its results.
Twitter attributes the better result to increased interest in its ad products as the economy started to recover, with total ad engagements up 35% YoY. Data licensing and other revenue also reached $134 million, an increase of 9%, while Twitter’s full-year 2020 revenue was $3.72 billion, an increase of 7% YoY.
The results, again, are steady, and show a growing maturity in Twitter’s business approach. But there are also some concerning notes in Twitter’s numbers.
“2020 costs and expenses totaled $3.69 billion, an increase of 19% year over year. […] Cost of revenue grew 38% to $433 million, driven by traffic acquisition costs, revenue share from partnerships, and public cloud-related expenses. Research and development expenses grew 25%.”
Those are some significant increases in expenditure, which reduced the margin on Twitter’s earnings performance. And more than that, Twitter’s anticipating higher costs moving forward.
“We expect to grow headcount by more than 20% in 2021, especially in engineering, product, design, and research. Given the hiring and investment decisions made in 2020 and previous years, along with anticipated 2021 headcount growth, we expect total costs and expenses to grow 25% or more in 2021.”
And that’s before you factor in any potential impact from the coming iOS 14 changes, which Twitter is anticipating will be ‘modest’.
“We expect total revenue to grow faster than expenses in 2021. How much faster will depend on our execution on our direct response roadmap and macroeconomic factors.”
That’s not exactly a heartening outlook for investors, but as we noted recently in regards to Twitter’s recent acquisition spree, the platform is under pressure to innovate fast, and ensure that it not only avoids a lull in the wake of the Trump era, but that it actually thrives and builds on that momentum. Maybe, with the right positioning of these new features, including newsletter platform Revue and its new audio Spaces offering. Maybe, Twitter can slot them in just right, and maximize its revenue potential. But it’s a big ask, and the numbers here don’t do a lot to alleviate that pressure just yet.
But it is hard to make any real comparisons in 2020. It was a year like no other, which produced unpredictable results on many fronts, making it difficult to use as a forecasting tool for what’s coming next.
Given this, we’ll likely need to wait till at least Q2 before we have clearer direction on how Twitter’s faring in the wake of Trump, and how its newer innovations and features are being received.
Meta Threatens to Ban News Publishers Amid Debate Over New Revenue Share Proposal
As Meta continues to lean further into AI-based content recommendations to keep users engaged in its apps, you know what it doesn’t need anywhere near as much as it used to? News content.
Meta has made this much clear, by ending its content deals with publishers, cutting its investment into news initiatives like its dedicated News Tab, Instant Articles and newsletters, and even directly noting that it’s de-prioritizing political news in-stream.
Which is why the latest push in the US to force Meta to pay more to news publishers seems particularly ill-timed.
This week, reports have suggested that the controversial ‘Journalism Competition and Preservation Act (JCPA) has been added to the annual defense authorization bill, which could see it carried into law in the new year.
The JCPA would facilitate an exemption under US antitrust law that would enable US news outlets to collectively bargain with social media platforms in order to negotiate a larger share of ad revenue, in exchange for the use of their content – i.e. it would force Meta to pay for links to news content in its apps.
Which is now, and always has been a controversial policy approach. But with the Australian Treasury Department recently reporting that its similar Media Bargaining Code has been a success, and has re-directed millions into the local media market, other nations are now taking a closer look – with New Zealand now also considering its own Media Bargaining Code along similar lines.
But again, Meta probably doesn’t need news like it used to anymore, and it could cut it off entirely in response. Which is exactly what Meta has threatened to do.
As per Meta:
“If Congress passes an ill-considered journalism bill as part of national security legislation, we will be forced to consider removing news from our platform altogether rather than submit to government-mandated negotiations that unfairly disregard any value we provide to news outlets through increased traffic and subscriptions.”
Now, there’s a level of posturing here, and it seems unlikely that Meta would remove news content entirely. But that is what it did in Australia last year, amid negotiations over the media Bargaining bill.
At the same time, Australia’s media ecosphere is far smaller than the US. Would Meta really move to block all US news organizations from sharing content in its apps – and if it did, what would that mean for engagement and interaction in each?
This is the key point of the debate. On one side, media organizations argue that Meta generates a heap of engagement off the back of its reporting, which then constitutes a significant chunk of its revenue, because more users engaging more often means more ads, etc.
But Meta says that news content isn’t as big a deal to it as publishers seem to think – and as Meta notes, it views this as a more reciprocal relationship, where publishers use its apps to maximize reach, which in-turn helps them drive their business.
And again, Meta has been distancing itself from news content more and more over time, and leaning into a more TikTok-like approach of showing users video clips and entertaining posts, based on AI-fueled recommendations for each user.
Given this, could Meta now be in a position to actually cut off news publishers entirely, without impacting its revenue performance?
You can bet that, with Meta announcing major cutbacks, it’s not going to be giving up any revenue easily.
It’s early days, but this could be one to watch, as Meta potentially heads for a stand-off with publishers, in several regions, in the new year.