By Carlo Versano
For years, the essence of the social media business has been the sustained growth of the user base. But now, companies like Facebook and Twitter are showing that they can wring profits out of their users even as that user growth plateaus. But is that really a formula for long-term success?
Twitter ($TWTR) CFO Ned Segal told Cheddar's Jon Steinberg in an interview Monday that the platform has successfully grown revenues in excess of audience for the last three quarters, thanks largely to a stronger video-based ad model that serves up more relevant ads for users that are "not a tax on their time on the platform." Segal said Twitter's pitch to advertisers now focuses on targeting new product launches, redesigns, and pop culture events like movie releases to its influential audience "when they're most receptive."
Put simply: things people see on Twitter get them talking (and tweeting), which creates a "virtuous cycle" of brand awareness.
Even with domestic user growth slowing ー the company lost 4 million accounts year-over-year, though many of those were from its "purge" of bot and troll accounts ー Twitter reported a record quarterly profit and surging ad revenue.
However, that monthly active user growth is still the company's "lifeblood."
That metric provides a service both internally and externally for shareholders, Segal said. Specifically, the monthly number is helpful in determining the "pool" from which daily active users (DAU) can grow. For Twitter, that pool is 326 million people, as of its last report. The company still does not release daily active users, so it's impossible to know what percent of the MAU comprises DAU, though Segal said it's "well less than half."
"We see opportunity to continue to grow revenue in excess of audience in the near term as we continue to improve ad formats and drive better relevance and deliver a better ROI ultimately for advertisers," he said. "But ultimately, growing the base of people who use the platform is the lifeblood of the company and that's going to be our focus as we continue to invest and drive growth in the next few years."
Of course, ad sales mean squat when the platform itself becomes so toxic that it begins to drive away its own users. "Health is our number one priority," Segal said, referring to Twitter's recent mass purge of fake accounts and its pledge to do more to stop the epidemic of harassment and hate speech that has corrupted certain users' experience. Keeping Twitter a fun and useful tool is the "growth vector" from which everything else flows, according to Segal.
"Our purpose as a company is to serve the public conversation."
For full interview click here.