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Shares in Twitter Inc jumped 13 percent Tuesday after the social media company reported quarterly revenue above analyst estimates, which executives said was the result of weeding out spam and abusive posts and targeting ads better.
New ad formats, partnerships with content providers like the U.S. National Basketball Association and efforts to patrol abusive content are helping Twitter better compete for advertising dollars, executives said.
Social media companies have been under pressure over privacy concerns and political influence activity. Twitter has removed thousands of spam and suspicious accounts, which it blamed for sequential declines in monthly users in recent quarters.
Twitter executives said they saw opportunities for selling ads that earn revenue when users visit websites or download apps, citing success with major brands like Walt Disney Co. The company is looking to grow its sales team in 2019 to better serve big advertisers.
“Something where you see a blending of performance and brand is the Star Trek ad that Disney is running right now, where I click through to make sure that I’d be notified when more information was available about the next Star Wars,” Twitter Chief Financial Officer Ned Segal told analysts.
Twitter said pre-roll ads, or promotional messages that play before videos, are also growing.
The company said its monthly active users (MAU) rose 9 million to 330 million from the previous quarter, much better than Wall Street’s average estimate that it would lose 2.2 million users, according to IBES data from Refinitiv. Still, MAUs were down 6 million from a year earlier.
It was Twitter’s last quarter of disclosing MAUs.
From now on it will only provide “monetizable” daily active users (mDAUs), created to measure people exposed to advertising and exclude those who access Twitter via text messages or aggregating sites like TweetDeck.
For the first quarter, Twitter said mDAUs rose to 134 million, up 12 percent from a year ago.
Analysts were encouraged by signs the company had found ways to sustainably grow users and revenue, but said the new way of measuring users could make comparisons with rivals like Facebook Inc more difficult.
“People are not impressed with a made up metric and their reluctance to give us actual users,” said analyst Michael Pachter at Wedbush Securities. “I don’t think the stock can get out of its own way until they come clean and report the same metrics everyone else does.”
Forecast largely below Wall Street
For the first quarter, Twitter’s revenue rose 18 percent to $787 million from the year-ago quarter, topping analyst estimates of $776.1 million.
But Twitter also forecast revenue for the second quarter largely below analyst estimates, and said that it would continue to spend heavily on cleaning up Twitter as well as new ad products.
Ad sales jumped 18 percent to $679 million. In the United States, ad revenue rose by 26 percent.
Total operating expense including cost of revenue rose by 18 percent from the first quarter a year ago. The company reiterated that operating expenses would grow about 20 percent in 2019.
Twitter reported quarterly profit of $191 million, or 25 cents a share, compared with $61 million, or 8 cents per share, a year earlier. Excluding a $124.4 million tax benefit, the company earned 9 cents per share.
The results appeared to catch the attention of U.S. President Donald Trump, who called for the creation of “more, and fairer” social media companies, repeating his claim that Twitter is biased against Republicans, without presenting evidence.
“We enforce the Twitter Rules dispassionately and equally for all users, regardless of their background or political affiliation,” a Twitter representative said. “We are constantly working to improve our systems and will continue to be transparent in our efforts.”