Over the years, Twitter (TWTR) has been working to improve the health of its platform. The company has made undeniable progress in combating abuse and harassment, even if there's still more work to do on that front. A year ago, the social media specialist also tweaked its reporting structure. Monthly active users (MAUs) had been stagnating for quite some time, so Twitter instead shifted its focus to monetizable daily active users (mDAUs). Investors largely cheered the move, as it provided deeper insight into engagement and monetization.
Twitter just reported strong fourth-quarter results that showed all of its efforts are starting to pay off.
Image source: Twitter. Image copyright Atsushi Nakamichi for Twitter, Inc.
Closing out a strong year
Revenue topped $1 billion for the first time, which the company attributed to product improvements and engagement gains as Twitter has improved the relevance of the tweets that are algorithmically curated. The company also recently rolled out topics that people could follow in an effort to better organize content. Ad engagements increased 29% and cost per engagement (CPE) was up 13%.
Whereas MAUs had not been growing much previously, mDAUs continue to march higher, jumping 21% year over year to 152 million in the fourth quarter. On a sequential basis, Twitter added 7 million mDAUs during the quarter, most of which were outside of the U.S. In contrast, the bulk of the tech company's top-line gains came from within the U.S., where revenue increased 17% (international revenue grew a mere 3%). That's a testament to Twitter's progress with domestic monetization, even as the company banned political ads during the quarter, taking the opposite stance of larger rival Facebook.
Data source: Twitter. Chart by author.
Twitter added that it will no longer refer to users as "users" because the company wants to "demonstrate more empathy for the people who use Twitter." It's worth noting that Facebook's new family metrics also refer to users as "people" instead of "users."
The number of reports of abuse tweets declined by 27%, which is one of the key ways that Twitter gauges platform health. The company's artificial intelligence (AI) is helping to proactively flag potentially abusive tweets for review before that content is flagged manually by users...er, people on Twitter.
While Twitter had been doing a fairly good job of keeping costs in check in recent years, expenses are starting to rise again as the company invests in infrastructure to support video content, as well as research and development for product improvements. Total expenses jumped 22% to $854 million during the fourth quarter, outpacing revenue growth and pinching profitability.
That all led to net income declining by more than half to $118.8 million, or $0.15 per share. However, the year-ago quarter included a one-time tax benefit related to the release of a deferred tax asset valuation allowance, which created a tough year-over-year comparison.
As Twitter kicks off 2020, the company says it is prioritizing four primary objectives: increasing developing velocity, improving the health of public conversations, strengthening revenue "durability," and hiring talent.
