Twitter holds up ad revenue after Apple's privacy rule change, misses estimates marginally
reported that its sales jumped over 21% in the fourth quarter, suggesting that
its digital advertising business has held up even as Apple Inc (NASDAQ: AAPL)
made changes in the data-collection process in iPhones that have hurt some
larger rivals
• Twitter said Apple’s privacy rule changes would have a ‘modest’ impact on its ads business
• Dull revenue outlook is partly due to the sale of ad platform MoPub
Twitter Inc (NASDAQ: TWTR) reported that its sales jumped over 21% in the fourth quarter, suggesting that its digital advertising business has held up even as Apple Inc (NASDAQ: AAPL) made changes in the data-collection process in iPhones that have hurt some larger rivals.
Although the company missed earnings expectations across the board, the earnings were not as disappointing as Facebook’s parent company Meta Platforms Inc (NASDAQ: FB).
The microblogging platform announced a $4 billion share buyback program. Twitter also said it expects to earn between $1.17 billion to $1.27 billion in the next quarter, while analysts had expected about $1.26 billion, which is a bit lackluster.
Twitter dropped over 4% after Wednesday’s market close but jumped 8% on Thursday early trading, recovering most of its losses, as the accelerated share repurchase program helped buoy shares.
Shares fluctuated between a slightly positive and slightly negative later trading session on Thursday.
‘Modest’ impact on ad business
The social network said Apple’s privacy rule changes would have a “modest” impact on its business moving forward, as Twitter makes most of its money from brand advertising, requiring less targeting data.
Changes in the privacy policy now force companies with apps on the Apple store to explicitly ask for permission before collecting data from users on iPhones.
While Twitter’s focus on brand advertising is currently helping the company avoid major disruptions, it is also trying to build more demand for direct response ads, which are more lucrative, and currently comprises just 15% of Twitter ads.
Revenue hit due to MoPub divestment
Sales in the quarter ended on December 31 rose to $1.57 billion, compared with the $1.58 billion analysts had predicted.
Twitter added 6 million new users between October and December, bringing the average daily active users (DAUs) to 217 million, a 12% jump from a year earlier, at the end of the fourth quarter.
The lackluster revenue outlook is partly due to Twitter’s recent sale of ad platform MoPub, Ned Segal, the chief financial officer, on Thursday said in the statement.
“We think we can make up some of that in 2022,” he said, referring to the revenue hit from the sale of MoPub, which brought in $281 million revenue last year. “But we should be able to make up all of it in 2023.”
In October, Twitter sold MoPub to AppLovin for $1.05 billion in an all-cash deal closed on January 1.
San Francisco-based social media company has entered a new chapter, following the unexpected resignation of co-founder Jack Dorsey as CEO in November and naming the former Chief Technology Officer Parag Agrawal to take the helm.
Twitter is feeling pressure to move faster in building new products and set ambitious revenue and user growth goals last year to convince skeptical investors that it’s serious about expanding the business.
The company has shown steady growth for years, but its stock gains have lagged behind industry peers.