Twitter’s user growth fell short of expectations for the third quarter in a row, and it issued tepid revenue guidance despite benefiting from a broader surge in digital advertising spending during the pandemic.

The San Francisco-based social media group said its first-quarter revenue increased 28 per cent year on year to $1.04bn, slightly ahead of analysts’ expectations of $1.03bn.

The company recently revamped its offering to advertisers amid a wider boom in digital ad spending reported by larger rivals Facebook and Google.

Despite “strong adoption” of its new ads system, Twitter said it expected revenues in the second quarter of this year to come in between $980m and $1.08bn, at the lower end of consensus estimates for $1.05bn.

Twitter shares dropped more than 10 per cent in after-hours trading, bucking the trend at Facebook and Google, which soared on bumper quarterly earnings earlier this week.

199m the number of logged-in users to whom Twitter showed advertising in the first quarter of 2021

When asked why Twitter had failed to keep pace with digital media rivals in the first quarter, chief financial officer Ned Segal said the company relied more heavily on marketers taking out brand advertising campaigns, which typically get planned after the Christmas holidays. This was likely “exacerbated” by brands being more cautious about spending because of the Capitol riots and President Joe Biden’s inauguration, he added. 

Twitter also said monetisable daily active users (mDaus) — a homegrown metric that counts the number of logged-in users to whom the platform shows advertising — rose 20 per cent year-on-year to 199m, also shy of the 200m analysts were expecting. The quarterly results are the company’s first since the network banned one of its most prominent users, former US president Donald Trump, permanently in January.

In a letter to shareholders, Twitter reiterated a warning that the pandemic-related boost to user growth — as people used devices more during lockdowns — was easing and would likely lead to slower, “low double-digit” growth rates in the coming quarters, particularly the current one.

Total costs and expenses are expected to rise at least 25 per cent year-over-year in 2021, ramping up over the course of the year, it added.

Twitter has been investing in several forthcoming features in an attempt to boost engagement and diversify its revenue sources beyond advertising following concerns over its sluggish product innovation. 

“We continue to expect total revenue to grow faster than expenses in 2021, assuming the global pandemic continues to improve and that we see modest impact from the rollout of changes associated with iOS 14.5,” Twitter said, referencing Apple’s forthcoming privacy changes to its iPhone operating system, which will make ad tracking more difficult. 

“How much faster will depend on various factors, including our execution on our direct response road map and macroeconomic factors.” 

Net income rose to $61m, compared with a net loss of $8m in the same quarter last year.

Twitter’s shares touched record highs in early March, after the company set out its first-ever long-term revenue and user goals — boldly planning to “at least double” its annual revenue from $3.7bn in 2020 to $7.5bn in 2023 and reach 315m mDaus by that point.

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