This week Twitter released its Q3 earnings, which saw revenue jump 37% year-over-year to $1.28 billion, ad revenue increase 41% year-over-year, and its average monetizable daily active users (mDAU) reach 211 million, up 13% year-over-year.
Wall Street responded positively to the numbers, despite a operating income loss of $743 million for the quarter, as it seems Apple's recent iOS 14.5 privacy changes, which require users to opt in for ad-tracking, only had a modest impact on the social media giant.
The loss this quarter also includes a one-off litigation charge of $766 million, relating to a class-action lawsuit that alleged Twitter and its executives misled investors over user-engagement information.
However, stepping away from the figures, it was CEO Jack Dorsey's comments on this week's earnings call that shed some light on where Twitter will be prioritizing investment over the coming months and years - with personalization and commerce front of mind. Dorsey said:
We had a solid Q3 with strong performance across revenue products and continued audience growth. The last time we talked, you heard us talk about our intention to build an ecosystem of connected features and services focused on serving three core jobs; news, discussion, and helping people get paid.
In Q3, we launched products across all of these categories, including Ticketed Spaces, Tips, Super Follows, and narrow casting with communities. We also had the ability to pay your favorite creators using a variety of payment methods, including for the first-time Bitcoin.
We continue to upgrade our machine learning systems as well, which are improving personalization throughout the product. We're just getting started, but already Twitter feels more responsive and intuitive, lot's more to come here.
As we approach the end of the year, we feel confident about where we're headed. Overall, we're on course to leave 2021, a more focused Company with clear priorities.
Personalization is Twitter's ‘greatest opportunity'
Dorsey said that personalization and relevance are Twitter's greatest opportunity and provide huge potential for growth. He said that this is an area that Twitter is behind the curve, but where the company has consistently seen the greatest gains. This relevance - or seeing the right ‘signals' on Twitter - will be focused on both ads and tweets alike. Dorsey said:
This mainly speaks to our application of machine learning in general, AI, across every product surface that we have. But it also lends itself into some of the newer products and capabilities that we've been talking about. Some far longer, some more recently.
Topics and interests continue to be a highlight. We are close to 12,000 topics now, 11 different languages, 230 million accounts follow at least one topic. This helps our consumer experience, helps our business, because it consists of a signal with a ton of intent - I'm expressing intent around a particular issue or topic instead of us having to employ it. And it also lays the foundation for the products that we want to create.
We have so much more work to do in terms of machine learning and just generally applying AI to every surface area we have.
So we're going to put a premium on finding all the right signals to make sure that you're not just seeing more relevant ads, but you're seeing more relevant tweets as well. These are very similar systems, so I don't think it's all that far off and that we can start using more and more of these signals to increase the relevance of what we show. But this is the greatest opportunity for us in terms of relevance. And that drives everything from growth in usage, but also to our advertising segments.
Commerce makes gains
In Q3 Twitter also began exploring the potential for shopping on the social media platform, as iti launched a pilot of its Shop Module with a handful of brands in the US. Shop Module allows Twitter to explore how shoppable profiles can create a pathway from talking about and discovering products on Twitter, to actually purchasing them.
What Shop Module looks like is a dedicated space at the top of a profile where businesses can showcase their products. When people visit a profile with Shop Module enabled, they can scroll through the carousel of products and tap through on a single product to learn more and purchase in an in-app browser, without leaving Twitter.
Commenting on the opportunity of commerce for Twitter, Dorsey said:
Commerce is an area where we want to start small and scale. So we want to make sure that we are building a great product that people want to stick with. And right now, the opportunity is a lot smaller, but that doesn't limit us later on from much, much larger retailers and brands.
I also think there's a lot of opportunity to partner a lot more, so that people who already have e-commerce solutions up and running with their inventory and tied into potential legacy systems, where a lot of larger retailers have constraints around.
But that's just one tap or one click to turn it on and turn that inventory on to Twitter as well. So we want to make sure that we're first and foremost building great products and then we will look to scale it and then turn on more of the sales engines as you mentioned.
Dorsey has a careful balancing act here. On the one hand he doesn't want to ruin the level of engagement Twitter's active user base has, whilst on the other introducing features that monetize the platform. We've seen how too much emphasis on monetization has deteriorated the user experience on other social media platforms, such as Facebook and Instagram. Twitter's approach of starting small, taking a targeted approach to pilots and then scaling up after testing is a sensible one - but exercising caution, whilst satisfying investors, is not easy.