At Twitter, a pattern is emerging: its ad business is growing at a steady clip, but it can't get the number of users to grow or stick around.
The social media company posted $361 million in revenue, a 114% annual increase, according to its filing on Wednesday. Advertising revenues reached $320 million. Its other revenue bucket -- "data licensing and other" -- expanded by 171%, reaching $41 million. Mobile is now an even greater chunk of Twitter's ad business, accounting for 85% of its overall ad revenue.
But Twitter hasn't solved its nagging growth issue, with the pace of active user growth slowing slightly in the third quarter, as compared to the second quarter. During the quarter, which included July, the final month of the World Cup, the company added 13 million monthly active users, with three million coming from the U.S. It has 271 million total users.
Twitter's key metric for engagement -- "timeline views," the number of times a user refreshes a feed -- showed slowing growth as well. However, Twitter was able to get more ad dollars per view, bringing in $4.28 per 1,000 timeline views in the U.S.
"I'm confident in our ability to build the largest daily audience in the world, over time, by strengthening the core, reducing barriers to consumption and building new apps and services," CEO Dick Costolo said in a statement.
Twitter had a busy third quarter. It introduced its video ad product, a new ad pricing model -- based on campaign objectives, such as app-installs and website conversions -- and a 'buy button,' its maiden step into e-commerce. It also raised around $1.8 billion in debt, a signal to many observers that the company is gearing up for a major acquisition.
Twitter also teased, much more quietly, an algorithm. In August, users began to notice tweets in their timeline that were not missives, retweets from people they followed or promoted posts. Twitter acknowledged the changes two months later, in a blog post that explained the service was generating content users may find "interesting or entertaining."
On the earnings call, CFO Anthony Noto noted Twitter's headroom to expand its number of paid Tweets, arguing that advertisers were increasing their budget on the platform. "Our load rate remains significantly below our industry peers," he said.
While ad revenue grew by 109% during the quarter, the cost per ad engagement declined in annual growth, as it has for every quarter Twitter has disclosed. However, Mr. Noto said the metric expanded by 3% from the prior quarter "due to the increased adoption of higher priced and higher performing ad units."
For its ad business, Mr. Noto also mentioned a "meaningful contribution from new ad formats, including mobile-app downloads, website cards and promoted video ads." The video product has "gotten a very nice uptick," he later added, but would not divulge any details on its contributions to overall ad revenue.
Both Messrs. Costolo and Noto focused on the logged-off users who see Twitter content, an increasingly interesting audience to Twitter and its investors. That audience size is "two to three" times the monthly active user total, the executives said, repeating the figure from the prior quarter.
Mr. Costolo spoke briefly about the theoretical potential for running Twitter native ads against syndicated tweets on other publications. And Mr. Noto was blatant that this audience is in Twitter's financial sights. The audience, he said, is "one that we feel confident that we can monetize, once we nail the consumer experience."
Recently, Twitter has more aggressively lobbied marketers and analysts that it is a real-time communication platform -- one distinct from Facebook.
But despite its efforts, analysts still think of it that way. Last week, Citibank initiated its coverage of the Twitter stock with a neutral rating. The firm estimated that Twitter's ad load -- its paid posts as a percentage of content -- was around 5% and will top off at 10% by 2022; its CPMs in the U.S., Citi analysts wrote, would grow from around $5 to $8.50 over ten years.
"While we like the Twitter business," the report reads, "we think [Facebook] represents a more compelling investment."
Contributing: Tim Peterson
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