Quality over Quantity – in Advertising
Articles:
https://www.cnn.com/2018/10/25/tech/twitter-earnings-q3/index.html
https://www.bbc.com/news/business-24397472
Twitter gets about 85% of its revenue from advertising according to bbc, so one could be excused for believing that their number of active users and their revenue should perfectly correlated. Yet one would be wrong. On Thursday, Twitter “posted stronger than expected sales and profits for the third quarter despite a continued decline in the number of monthly active users.” In April, the company said that monthly active user growth could be ‘negatively impacted’ by the General Data Protection Regulation that went into effect in Europe. Its efforts to comply with the new privacy law means that it experienced a significant drop to 326 million monthly active users in the ending quarter as compared to 330 and 335 million monthly active users in the two previous quarters.
This is related to our class because its about the advertising and shows how much advertisers’ value of ads matters. Jack Dorsey, Twitter’s CEO and cofounder said that they reduced ‘suspicious’ account signups by 20% and believes that although “these efforts to make Twitter less toxic may have ‘short-term implications’ for user numbers… the company’s health initiatives will be key to the ‘long-term growth of the platform.” Decreasing ‘suspicious’ accounts is good for advertisers because even if it means fewer clicks on their ads, the clicks they receive will more likely be from real users. This means that advertisers would value ads on Twitter more and would be willing to pay more.
This is reflected in Twitter’s numbers. Their sales hit $738 million for the quarter, almost a 30% increase from last year, keeping its streak of profitable quarters, and raising its stock price by more than 10% in pre-market trading. Twitter is a very good and recent example of the old adage, quality over quantity, showing that improving the health of the community as a whole is more important than increasing its size.