Twitter Earnings Shed Little Light on Ad Progress

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The social-media company is still scheduled to pitch ad buyers next week at a NewFronts presentation

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The next opportunity for a glimpse at Twitter’s strategy for its ad business is likely to come next week at the Interactive Advertising Bureau NewFronts presentations, where companies such as ByteDance Ltd.’s TikTok, Amazon.com Inc.

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and Meta Platforms Inc.

will pitch advertisers about content and tools. Twitter still plans to host a presentation on Wednesday.

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Twitter’s ad business is in a new spotlight since its board accepted a $44 billion offer from Mr. Musk to buy the company and take it private. The deal will see Twitter’s annual interest burden jump to $845 million annually from $51 million in 2021.

Mr. Musk has criticized the company’s reliance on advertising, which is by far Twitter’s chief revenue source, comprising about 92% of total revenue in the first quarter. Mr. Musk has said Twitter should shift toward a business model that relies more on subscriptions. Twitter Blue currently adds premium features like “undo tweet” for a monthly fee of $2.99. Mr. Musk has suggested the subscription include removing all ads.

Twitter’s advertising revenue has climbed steadily over the past decade but remains far smaller than that of Meta Platforms and Alphabet Inc.’s

Google. On Thursday, Twitter reported that its advertising revenue rose 23% to $1.11 billion in the first quarter, a 26% increase on a constant-currency basis. Meta’s advertising revenue totaled $27 billion in the quarter, while Google’s was $54.7 billion in the same period.

Advertisers have generally used Twitter’s platform to raise brand awareness alongside big events and sports. The company said last year that about 85% of its annual advertising revenue came from brand advertising budgets, focusing on marketing objectives such as interest and awareness, and 15% from performance or direct-response advertising, which drives a consumer to take an action like downloading an app or visiting a site.

That 15% lags behind peers in social media, Cowen analysts said in a note this week. And it has made the company more susceptible to marketers pulling back on broad brand-building ads, a reason that Twitter’s ad revenue suffered more than some rivals in 2020 as the pandemic began.

Twitter Chief Executive Parag Agrawal has said the company’s long-term goal was to see an even split between branding and direct-response advertising revenue. Twitter in recent years has built new technology to encourage such a shift.

New products include buttons that can take users to specific URLs or app-store pages. The company also tested an e-commerce offer called Twitter Shops, which lets retailers publish mini catalogs of products on the app.

Thursday’s earnings report didn’t indicate whether those efforts in particular are getting any traction, but they are suggestive, said Brian Wieser, global president of business intelligence at ad-buying giant GroupM.

“Twitter is not a platform that has been necessarily known for being a performance-based environment,” Mr. Wieser said. “But I do think that, whatever the source, the growth that they’re seeing suggests positive trends.”

Write to Katie Deighton at [email protected] and Megan Graham at [email protected]

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Credit: www.wsj.com /

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