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Business, Technology

Three Big Takeaway Lessons from Twitter’s Latest Quarterly Earnings

March 8, 2021 by Christian Zilles

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Photo Credit: pexels

Given all the controversy that has surrounded Twitter over the past twelve months – especially its highly contentious lifetime ban of former President Donald Trump – all eyes were on Twitter when it announced its first round of quarterly earnings in 2021. How had the company fared amidst a pandemic? Did Twitter’s meddling in the political election and dabbling in political censorship impact the size of its overall user base? And, perhaps most importantly, had Twitter finally found a way to monetize its user base?

Lesson #1: Twitter’s use base increased despite a worldwide pandemic

Compared to a year ago, Twitter’s user base has actually increased in size by 26.3%, to 192 million mDAUs (monetizable daily active users). Moreover, Twitter continues to keep pace with Wall Street expectations about user growth on a quarter-over-quarter basis. (Analysts had expected Twitter’s user base to grow to 193.5 million mDAUs.) During a worldwide pandemic and universal lockdowns, we all stayed home. And presumably a lot of us signed up for Twitter accounts while waiting for the coronavirus crisis to come to an end.

But here’s the thing – all of this new user growth appears to be coming from overseas, and not from the United States. In fact, as Twitter acknowledged, only 20 percent of all Twitter users are in the United States. So while we might think of Twitter as a uniquely American social media platform, the reality is actually quite different. At some point, it matters that 80 percent of your customer base is coming from places like Asia and Latin America and not from the United States. No wonder so many of Twitter’s new social media experiments seem to happen first in places like Brazil and India, and not in the United States.

Lesson #2: Politics has not yet dampened Twitter’s growth

The fact that its user base continues to grow, says the social media platform, is proof that “Twitter is bigger than any one account.” In other words, kicking Donald Trump off the platform and de-platforming many of his followers hasn’t yet come back to hurt Twitter. People might claim that they are shutting down their Twitter profiles and migrating to new platforms like Parler or Gab, but the numbers (at least for now) don’t seem to back up that assumption. However, it’s still too early to tell, especially since former President Trump has been keeping a relatively low profile during the first 30 days of the Biden administration. Once Trump decides which social media platform will become his new home, we can expect a massive migration away from Twitter and towards this new platform of choice.

Lesson #3: Twitter is still having a hard time making money

Twitter’s earnings call was a case of good news, bad news. The good news was that user growth is on the upswing and ad revenue actually increased more than 31 percent on a year-over-year basis, to $1.15 billion. However, headcount and expenses are also rising. According to Twitter, headcount is up 20 percent and expenses are up 25 percent. So, while Twitter did manage to meet and even exceed Wall Street earnings and revenue expectations, it’s still clear that Twitter is having a hard time making money. 

Final thoughts

2021 might end up being the year that we find out what Twitter really is. Is it a news publisher, and thereby no longer worthy of Section 230 protections? Or is it a thriving online community full of rich and varied discourse? Is Twitter a beacon of free speech and democracy? Or is it a dark corner of censorship, hate speech and cyber bullying? How Twitter manages to answer these questions in the months ahead could go a long way in determining the future of the company. Now that we have the emergence of fresh new social media rivals in the form of platforms like TikTok and Clubhouse, Twitter needs to prove that it is just as innovative and relevant as it was nearly a decade ago.

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Tags: finance, social media, twitter

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Christian Zilles

Founder and CEO of Social Media HQ.

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