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Twitter, Inc. Management Talks Audience Growth, Character Limits, and AI

By Daniel Sparks - Oct 27, 2017 at 11:46AM

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Twitter's earnings call proved to be an interesting one. Here are three quotes you won't want to miss.

Twitter (TWTR -0.92%) surprised investors Thursday morning when the company reported better-than-expected third-quarter results, including an acceleration in user growth, a forecast for possible profitability by the end of the year, and more. Twitter CEO Jack Dorsey summed up the results optimistically, saying, "This quarter we made progress in three key areas of our business: we grew our audience and engagement, made progress on a return to revenue growth, and achieved record profitability."

But there's more useful fodder for investors beyond Twitter's earnings release. In its third-quarter earnings call with analysts, management provided more context for the quarter, as well as a glimpse at some of its plans for the future. Here are three of the most insightful quotes from the call.

A man in a suit and tie looking at his smartphone while waiting for the subway.

Image source: Getty Images.

Audience growth

One of the strongest points from Twitter's third-quarter results was its robust growth in daily active users. Not only was this metric up 14% year over year, but this rate was an acceleration from the 12% growth Twitter posted in Q2.

However, further context about Twitter's daily active user growth provided in the company's conference call makes this trend even more interesting. "We had six quarters of solid growth in daily active users, with the last four quarters up double digits, and that's against an increasingly tough comparison," said Twitter's chief operating officer, Anthony Noto.

Noto went on to comment on how important user growth is to the company's business: "Having audience growth is really important for our partners, both on the advertising and on the content side, so they are confident investing in a platform that they know is going to continue to grow."

Character limits

Twitter recently began testing a 280-character limit for tweets (double Twitter's current 140-character limit) for some users, and an analyst asked whether the tests are proving successful or not.

"It's too early to tell right now. We're still watching and learning and observing how this impacts the service overall," Dorsey responded. He went on to emphasize that the company will not compromise on the brief and rapid communication its platform stands for:

We want to make sure that we are maintaining our sense of brevity, make sure that we are maintaining our sense of real time and showing what's happening in the world. But we want to make sure that we're also enabling more voices to speak and not be frustrated by the constraints, so they can actually get their thoughts out in real time and really share with the world what [sic] their thoughts and what's going on.

Dorsey said Twitter will share the data and findings it generates from these tests "in the next few weeks."

Twitter's artificial intelligence team

It's no secret that artificial intelligence and machine learning is becoming increasingly important in algorithm-dependent businesses. And social networking is, of course, heavily dependent on algorithms -- particularly when deciding what content to serve users.

To witness AI's growing importance, just look at the other company Jack Dorsey is leading, Square (SQ -6.46%). Square recently recruited Intel's VP and general manager of artificial intelligence products to its board of directors to help the financial-technology company integrate deep learning into "every aspect" of its business. In addition, Square is already relying heavily on machine intelligence to sift through and approve loan applications with Square Capital.

Given the growing importance of AI, one analyst asked about where Twitter's AI team currently stands. Dorsey responded:

We've had a lot of strength in our AI discipline, machine learning and deep learning in particular. For
the past 1.5 years, we've really been applying it to the core aspects of the product, so we feel really good about the size of the team and the depth of the team.

Overall, Twitter's earnings call reiterated the company's strong results and reinforced management's confidence in its expectations to return to growth.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Twitter. The Motley Fool owns shares of Square. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.

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