Twitter (TWTR) is scheduled to report results of its third fiscal quarter before the market open on October 26, with a conference call scheduled for 8:00 am ET. What to watch: 1. USER METRICS: Twitter’s monthly active users, or MAUs, are a closely watched measure of its popularity and growth potential. Last quarter, the company reported global MAUs were flat sequentially at 328M users, but up 5% year-over-year. Meanwhile the company’s U.S. base decreased approximately 2% sequentially to 68M users, but increased 4% year-over-year. In a July 27 note, Baird analyst Colin Sebastian said Twitter’s second quarter report shows that its user engagement and cost control initiatives are showing signs of progress, but he believes the company’s lack of user growth remains concerning. Watch for updated numbers in the report, as well as management commentary on user engagement. 2. AD REVENUE: Key to Twitter’s business model is its ability to drive advertisers to the platform. In Q2, the company reported a roughly 8% fall in ad revenue versus last year. On Twitter’s Q2 earnings call, COO and former CFO Anthony Noto said he is “really encouraged” in the progress that the company is making on owned and operated advertising, stating “We have a lot more to do to get our revenue growth to our user growth, but we feel like we’re moving in the right direction.” In the second quarter, with existing global and U.S.-based advertising upfront partners, Noto said the company “saw linear improvement from April into May into June. I want to emphasize, this is a relatively small component of overall revenue. But it’s an indication of when we are able to connect and engage with advertisers, we’re able to show them the value and see the benefits in their spending. And that was clearly evident in May and June relative to prior months.” In a note on July 24, Wedbush analyst Michael Pachter said reacceleration of user growth and an improving user experience are “positive signs,” but he thinks advertisers will devote their ad budgets to platforms with better targeting, reach, and scale until Twitter can return to revenue growth. 3. PRODUCT TESTING, UPDATED POLICY: Since Jack Dorsey’s return as CEO, Twitter has increasingly pivoted into new content such as live-streamed events and sports while tweaking its core product. In the quarter, the company began testing a new tweetstorm feature in its Android app which automatically splits text into individual tweets as well as an Android app in the Philippines for Twitter Lite, a mobile website that requires less mobile data for use in emerging markets where data networks may be slow and costly. The company also began testing longer 280 character tweets with a small group of users, with product manager Aliza Rosen saying, “We want every person around the world to easily express themselves on Twitter, so we’re doing something new: we’re going to try out a longer limit, 280 characters, in languages impacted by cramming.” The company also updated public policies to include ‘newsworthiness’ after it did not remove a tweet by President Donald Trump on North Korea in part because it was “newsworthy” and said it would step up efforts to stop malicious activity following Russian interference in the 2016 election. Watch for the impact of those additions, as well as the hire of Ned Segal as CFO.
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