Twitter plunges to loss thanks to weakened online ad demand

Twitter has been on the rise over the last few years, but the coronavirus pandemic has slammed the brakes on its progress.

While some of its neighbours have been sailing through the coronavirus turbulence, Microsoft or Google for example, Twitter is one Silicon Valley resident which is wearing some very visible bruises.

“In this difficult time, Twitter’s purpose is proving more vital than ever. We are helping the world stay informed and providing a unique way for people to come together to help or simply entertain and remind one another of our connections. We’ve delivered our strongest ever year over year MDAU growth.”

Source: Twitter Investor Relations

Although engagement has been increasing, Monetizable Daily Active Users (MDAU) were up 24% year-on-year, this was not reflected in the advertising revenues. The team has suggesting the period begun strongly, however from March onwards, when societal lockdowns were introduced, advertising demand shrunk.

This does put an end to a promising streak of financial results, which suggested Twitter was on course to join Silicon Valley’s big leagues.

While Twitter could be recognised as one of the founding fathers of the Silicon Valley fraternity, its financial performance has not lived up to the reputation. Users were never a problem, though engaging advertisers and creating a platform which offers ROI was. This equation was seemingly solved in recent years, with the introduction of new products and reporting features, though it seems to have reared its head once again.

When you compare Twitter’s current woes with the on-going success at Facebook and Google, perhaps advertisers are strategically placing resources with preferred platforms. In other words, as marketers see budgets trimmed in the face of a global recession, Twitter activity is being scaled back in favour of Facebook and Google.

We’ve said this before, but one bad earnings call does not make Twitter a bad company. Last October, Twitter share price tanked 18% as it failed to meet analyst expectations, but three months later it soared 15% after the financial statements were released.

The company is going through a tough period right now, but so are millions of other companies. This is a unique period in living memory and Twitter will play a very important role as the world recovers, especially with a Presential Election campaign on the horizon.