Twitter has released its first quarterly earnings of the year this week. Whilst the number of active users continues to increase year-on-year, the total revenue does not and more importantly, ad revenue has declined further. Despite this, the total number of active users continues to increase and engagement with ads have grown. So why has Twitter’s ad revenue taken a downturn?
Is Twitter profitable?
In Q1 2017, Twitter’s total revenue reduced for the first time, dropping by 8 percent year-on-year. Its ad-revenue also continued to decline but at a more significant gradient, dropping by 11 percent year-over-year. Twitter, therefore, recorded another net loss, this year of $61.6m compared to the $80m loss in the first quarter of 2016.
Growing audience activity
Despite the presence of bot accounts, the number of active users on Twitter has started to grow worldwide after gradually reducing month-on-month. The average monthly users now stand at 328m, a 6% rise on the first quarter of the previous year. Further to this, the number of daily users has increased in each quarter of the past year.
So despite the failure for Twitter to make a profit, Twitter still remains a great place to market your brand. A very notable recent case of the power of the Twitter’s audience comes from Wendy’s story. A Twitter user sent a tweet to the fast food restaurant asking for a year’s supply of chicken nuggets. Wendy’s agreed as long as he got 18m retweets. So far the user is on 3m retweets. A very valuable marketing plan that seems to have taken off on Twitter!
Twitter haven’t held back in using this case study as an example of the ability for businesses to drive brand awareness. It even led to the hashtag #nuggsforcarter.
Yo @Wendys how many retweets for a year of free chicken nuggets?
— Carter Wilkerson (@carterjwm) April 6, 2017
Where’s the ad-revenue?
Since the first quarter of 2015, the number of users engaging with ads – so clicking on links, watching videos and re-tweeting on Twitter has grown and grown – 139 percent since Q1 2016. Despite this, the average amount of money Twitter makes per ad engagement has decreased – down 63 percent in Q1 2017. This means that the money Twitter makes from running its own ads failed to grow. It fell 11 percent year on year to $415m.
In addition, Twitter’s ad revenue off-site failed to grow. It has dropped 8 percent year on year to $58m and is only two years old as a form of revenue.
In spite of twitter’s ad revenue problems, the belief is that if Twitter’s audience will continue to grow and the engagement with ads also. Twitter has undoubtedly pioneered a unique way of advertising in which companies can brand themselves as being extremely consumer friendly and engaging in real-time conversations with customers.