As you might expect, Twitter is seeing a lot more usage amid the COVID-19 lockdowns across the world – but that doesn’t, however, mean that Twitter’s making more money as a result, according to a new update from the company.
As reported by Bloomberg, Twitter has this week withdrawn its revenue and operating income guidance for the first quarter of 2020, as well as its outlook for expenses, headcount, and capital expenditures for the full year due to the rising impact of COVID-19.
As per Twitter:
“While the near-term financial impact of this pandemic is rapidly evolving and difficult to measure, based on current visibility, the company expects Q1 revenue to be down slightly on a year-over-year basis. Twitter also expects to incur a GAAP operating loss, as reduced expenses resulting from COVID-19 disruption are unlikely to fully offset the revenue impact of the pandemic in Q1.”
Those reduced expenses likely relate to the reduction in human moderators who have been sent home to help limit the spread of COVID-19. In their place, Twitter will increasingly rely on automation tools for reviews and approvals for the time being – but within that, it seems likely that Twitter will also see reduced costs, overall, depending on any potential compensation package in place for those workers.
So overall, Twitter is predicting broader revenue impacts – yet, at the same time, Twitter usage is rising.
So, theoretically, Twitter should be able to display more ads right now, not less, right?
The platform didn’t provide a detailed breakdown of the impacts here, other than noting that:
“Twitter had a strong start to the year before the effects of COVID-19 began spreading more broadly, including a successful Super Bowl and overall strength in the US. The COVID-19 impact began in Asia, and as it unfolded into a global pandemic, it has impacted Twitter’s advertising revenue globally more significantly in the last few weeks.”
The impact is likely coming from smaller advertisers and businesses that have either been shut down or restricted, and which are now switching their focus onto how they can simply stay in operation, as opposed to spending on ads. The rolling closures will also mean a significant reduction in ad spend from restaurants, cinemas, events, etc. While Twitter is seeing more usage, it makes sense that it would also be seeing less ad demand, at least in this initial stage of the lockdown period.
That may change as people get more accustomed to this changed environment, but Twitter is moving early to advise of the potential impacts. That could also have something to do with the fact that CEO Jack Dorsey was effectively saved from an effort to oust him by activist investor group Elliott Management Corp. earlier this month, after Dorsey and Co. made a deal to keep him in the job, contingent on strict performance improvements.
Among those measures, Dorsey needs to increase usage and “accelerate revenue growth on a year-over-year basis”, or he’ll once again face removal from the top job. Given the situation, the parameters of that deal will likely need to change, but by posting an update on the potential revenue impacts, Dorsey may also be getting ahead of any such action, giving himself more time.
It’ll be interesting to see how digital advertising trends shift amid the COVID-19 lockdowns as the weeks and months go on. More people will spending more time online, and more businesses will subsequently be looking to re-allocate their ad budgets to reach them, which will likely see increased opportunities for all digital platforms. But you do have to balance that against the potential impacts of closed businesses also being absent from the ad market.
The full impacts are difficult to measure at this stage, but as the shutdowns and restrictions drag on, we’re likely to see significant shifts in the digital advertising landscape.
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