Twitter ad revenue growth slumps to 8% in Q3 even as user growth continues
The company blames ad product issues.
Twitter reported $702 million in ad revenue for the third quarter of 2019 Thursday, an increase of just 8% year-over-year. Twitter’s total revenue for the quarter was $824 million, up 9% from the prior year, with a net margin of 4%, compared to 14% a year ago. Daily users on the platform continue to tick up.
Product problems. The company attributed the drop in ad revenue to product issues, specifically its Mobile Application Promotion (MAP) product and personalization and data settings. The company said the issues potentially impacted year-over-year growth by three or more points.
“More work remains to deliver improved revenue products. We’ll continue to prioritize our ad products along with health and our investments to drive ongoing growth in mDAUs,” said Twitter CFO Ned Segal.
Ad engagements are up, costs are down. Total ad engagements were up 23% year-over-year, in line with the growth seen in the past two quarters. Advertisers are paying less for those engagements. Cost per engagement dropped sharply, off 12% year-over-year.
Slow but steady user growth. Twitter’s mDAUs (monetized daily active users) increased by 17% compared to the prior year, up from 124 million to 145 million. U.S. mDAUs grew by 15% year-over-year to 30 million, up from 26 million.
On a quarter-over-quarter basis, mDAUs grew by just 4%. A trend similar to Snap which also reported 4% growth in DAUs during the third quarter of 2019 to 210 million.
This is the third quarter Twitter has reported the mDAU metric. The company decided in February to focus on authenticated users it is able to show ads to and moved away from the monthly active user (MAU) metric after it saw a noticeable slide in MAUs after efforts to purge spam accounts from the platform.
Why we should care. Arguably, the most concerning detail for advertisers coming out of Twitter’s third quarter earnings report are the reported issues with its Mobile Application Promotion product (a suite of products designed for app marketers on the platform) and personalization and data settings.
In its letter to shareholders, the company said it discovered — and took steps to fix — a bug that affected its Mobile Application Promotion product which impacted Twitter’s ability to target ads and share data with measurement and ad partners. “We also discovered that certain personalization and data settings were not operating as expected,” wrote Twitter.
The company expects the ad product issues will have an even greater impact on its fourth-quarter results, causing four or more points of reduced year-over-year revenue growth. “The increase reflects a full-quarter impact in Q4 vs. only a partial-quarter impact in Q3,” Twitter said.