LONDON (AP) — The global pandemic and U.S. protests are forcing a pullback by advertisers on Twitter, but it’s also led to an unprecedented surge of users.
Average daily user growth spiked 34% in the second quarter, the company said Thursday, the largest jump in users ever recorded by the company.
In an earnings call, CEO Jack Dorsey addressed an embarrassing hacking incident last week that compromised the accounts of high profile users, saying he felt “terrible” about it.
Shares of San Francisco-based Twitter bounced 4% higher in Thursday trading.
But the company took a huge tax hit to earnings, posting a net loss of $1.2 billion, or $1.56 per share, in the April-June period, compared with profit of $1.1 billion, or $1.43 per share, a year earlier.
Revenue fell by about a fifth to $683 million, far short of the $702 million Wall Street had expected, according to a survey of analysts by FactSet.
Twitter’s advertising business was hit harder than its larger rivals Google and Facebook, and analysts had expected the bleeding to continue in the second quarter. The company said ad revenue made a “gradual, moderate recovery” relative to levels in March but many brands then slowed or paused their spending in late May to mid-June, following the outbreak of Black Lives Matter protests in the U.S.
“We continue to see headwinds from lower global advertising demand due to COVID and civil unrest,” Dorsey said.
Ad revenue fell 15% in the last three weeks of June, which was better than the 27% decline in the final three weeks of March, with advertiser demand returning as the protests subsided, Chief Financial Officer Ned Segal said in the earnings call.
New users have been flocking to the platform as they isolate, with the number of daily active users jumping to 186 million.
“Twitter’s strength as a news and entertainment source has helped buoy engagement during the pandemic as housebound consumers use the platform for real-time news and information,” said eMarketer analyst Jasmine Enberg. But she does not expect this to continue as stay-at-home restrictions begin to lift and people start returning to more normal routines.
Investors have been waiting for Twitter to explore new revenue options — and offering paid subscriptions is one long-floated idea. Dorsey said the company is exploring this and other options, although he said the process is in the “very very early stages.”
“Most importantly we want to make sure that any new line of revenue is complementary to our advertising business. We do think there is a world where subscription is complementary,” he said in a conference call with analysts, according to a transcript. “We think there’s a world where commerce is complementary. You can imagine work around helping people manage payrolls as well that we believe is complementary.”
He said Twitter will likely begin testing these new ideas this year.
The earnings were overshadowed by the continuing fallout from a hack last week that targeted 130 accounts, including world leaders, celebrities and tech moguls, that appeared designed to lure their Twitter followers into sending money to an anonymous Bitcoin account. The company revealed more details Wednesday, saying hackers accessed the direct message inboxes of 36 accounts, including an elected Dutch official. It didn’t identify the official but Dutch anti-Islam lawmaker Geert Wilders said it was him.
“Last week was a really tough week for all of us at Twitter,” Dorsey said. “We feel terrible about the security incident that negatively affected the people we serve and their trust in us.”
Twitter executives deflected questions on another challenge: a social media ad boycott running for at least the month of July, and therefore not counted in the second quarter. Facebook is the primary target of the boycott by hundreds of advertisers over its policies and actions on hate speech and misinformation. Its effect on Twitter is less clear, with some advertisers pausing ads on all social media, though some analysts believe some ad dollars could be redirected away from Facebook to Twitter.