Twitter’s advertising revenue was hit hard by the pandemic, and the company says that the “US civil unrest” in May and June also made matters worse. Advertising revenue declined 15 percent year-over-year in the final three weeks of June, Twitter said, as brands slowed or paused spending entirely. “Demand gradually improved once brands returned after the protests subsided,” Twitter said this morning in its Q2 2020 earnings report.
Brands have been known to block ads from appearing near terms like “Black Lives Matter,” “George Floyd,” and “protest.” At the same time, several huge advertisers including Starbucks, Unilever, and Coca-Cola paused advertising across most social media platforms in June. The advertising pause was initially focused on concerns over hate groups on Facebook, but they expanded to include other platforms at a time when companies may have wished to limit their spending anyway.
With the exception of “late May to mid-June,” Twitter says advertising revenue has been improving since its low point at the very start of the pandemic in March. There was a “gradual, moderate recovery,” Twitter said, but it hasn’t been enough to make up for the steep losses. Twitter’s total revenue fell by 19 percent during its second quarter, once again pushing the company into the red — its second loss in a row after remaining profitable since the end of 2017.
Advertisers have been tightening their budgets as the pandemic forces consumers, particularly in the US, to clamp down on spending. That’s meant fewer ad sales for Twitter, which are its primary source of revenue. Advertising revenue fell 23 percent from the same quarter in 2019.
The problems started last quarter, when the pandemic hit in the final weeks of Twitter’s reporting period. It was enough to wipe out $20 million to $80 million in expected revenue and slash all growth in ad revenue over the prior year. At the time, Twitter declined to estimate how much it might earn in Q2, given the uncertainties of the pandemic.
One bright spot that Twitter is highlighting is user growth. The company grew to 186 million daily users, up from 166 million the prior quarter. It also reflects the largest year-over-year growth (up from 139 million) since Twitter started reporting daily users in 2019 (which it started doing because its prior usage stat, monthly users, kept going down).
To make up for falling ad revenue, Twitter is working on new money-making features. On a call with investors, Twitter CEO Jack Dorsey mentioned subscriptions and commerce as possible opportunities, as well as helping sites managed paywalled access to stories. “You will likely see some tests this year,” Dorsey said.
The pandemic struggles also come as Twitter faces down two other serious threats: fallout from the unprecedented hack earlier this month that saw breaches of top user accounts, and the eyes at activist investor firm Elliott Management, which earlier this year tried to push out Dorsey. Twitter and Elliott eventually came to an agreement on user growth and revenue targets that would keep Dorsey on top, but it’s likely Twitter will miss whatever revenue target was set given the severe impacts of the pandemic.