Twitter’s deal fiasco with Elon Musk has overshadowed its business challenges, which will likely intensify as growth in the advertising market slows and the company grapples with the operational fallout from Musk’s mess.
Why is this important: Musk’s initial $44 billion bid to buy Twitter was already an extraordinary premium on Twitter stock, but it’s an even bigger number given the current market crash.
Details: Twitter’s revenue growth has been slower over the past five years than its other ad-supported peers, including Snapchat.
- This is largely due to its reliance on advertising from big brands as opposed to small and medium-sized businesses, and its growth of users primarily from less lucrative overseas markets.
Between the lines: The company has made strides in advancing its advertising product over the past few years through investments in video advertising, direct response advertising and, more recently, through investments in contextual ad targeting through its Topics feature.
- But while those investments helped Twitter grow its ad business by 40% year-over-year between 2020 and 2021, the tailwinds in the ad market last year that most certainly contributed to that growth have since subsided. calmed down.
Be smart: Twitter has tried to diversify its business away from ad revenue by investing in new consumer subscription products, like Twitter Blue and Super Follows.
- Data from Sensor Tower, a third-party app analytics firm, suggests the company has spent around $4 million on the Apple App Store and Google Play Store globally over its lifetime. .
- Given that Twitter only recently introduced Twitter Blue and Super Follows in 2021, these earnings are likely weighted to the past year.
Yes, but: User growth within the company remains relatively strong, despite engagement appearing to lag behind some competitors.
- The company added 14.3 million monetizable daily active users (mDAUs) in the first quarter of this year, beating analysts’ expectations for the quarter and bringing its total number of mDAUs to 229 million worldwide.
- An internal meeting cited by Reuters suggests the company is gearing up for another aggressive quarter for user growth.
- Still, engagement with the app is key to driving stronger ad growth, and Sensor Tower data released this month revealed that only 18% of active Twitter users opened the app every day on the second quarter of 2022, compared to 39% of Instagram users, 29% of TikTok users, 27% of Facebook users and 26% of Snapchat users.
The big picture: Twitter shares have been on a downward spiral since Musk tried to formally pull out of the deal, plunging to a two-year low on Monday.
- While executives appeared confident during its latest earnings call that the company would be able to achieve its stated goal of reaching 315 mDAU and $7.5 billion by 2023, the deal largely eclipsed the deal. optimism of society.
- Some investors have suggested the deal has impacted internal morale and investor optimism, hampering progress. Reports cite internal distractions, particularly amid recent leadership turnover.
Go further: The Biggest Losers From Elon Musk’s Twitter Mayhem