This Q should've been a victory lap for the Twitter team on a major accomplishment. mDAU growth had stalled in the HSD/LDD range for 5 years. 17% is a major change. w/ very little inertia on sequential growth, the FY number will be even better
Notably this acceleration happened without any major events or catalysts to spark engagement. This was the result of 4 years of hard work trying to focus Twitter around its essence--a platform to engage in one's interests. That's why all of us on #FinTwit are here.
What went wrong? The best explanation comes here from adexchanger adexchanger.com/data-exchanges…
This was more than just a little bug-it was a fundamental problem at the core of 1 of TWTR's revenue products. Ned said as much in confessing: "These issues were in our control, and we will work to do better."
Specifically, the problems were with Mobile App Promotion, or MAP, which is "a suite of products that enable advertisers to promote mobile apps via Twitter. These include app installs, conversions and re-engagement. "
Importantly, MAP has not been a big priority for TWTR but it's much bigger in Japan in particular, the company's 2nd largest market after the US. ARPU in Japan (embedded in int'l) was thus down meaningfully, dampening the impact of the dMAU acceleration.
But as the cliche goes, "never waste a good crisis." There's some real opportunity here. Ned let on later in the call that MAP has not been a priority, but now engineers are set about making it one & improvements will bring a better direct response & self-serve experience 
Importantly, the lack of good direct response & self-serve have been known limitations in advertising on TWTR. Then why weren't these priorities? B/c safety, user experience and simplifying onboarding were the foremost challenges with the most upside.
So where does this leave TWTR the stock? Every analyst is chasing the price lower with their PTs and no one is buying into any persistence in mDAU acceleration. Meanwhile, next year with the US election & the Olympics, there are 2 great catalysts to keep things rolling.
If you believe that management can maintain some of the momentum on the mDAU growth acceleration and get ARPUs moving back up modestly this stock is a 2x in 2 years.
(yellow higlighted cell is int'l ARPU derived from mid-point of Q4 guidance)
(yellow higlighted cell is int'l ARPU derived from mid-point of Q4 guidance)
If Twitter can think a little outside the box & create new revenue products, then the upside is potentially dramatic. The rise of premium/subscription feeds is IMO the single biggest opp, even moreso than a premium Tweetdeck.
For example, Premo Social charges a 10% take rate + cc processing fee in order to manage authentication and payment from those with valuable content. The spy brief from @20committee has 2.2k subs for example. That's just 1 example. Imagine how big this could get powered by TWTR.
I understand the desire to leave the platform open, but people are already premiumizing feeds. @jack & team have been great at observing how the platform is being used & enabling it themselves. Premium feeds will happen w/ or w/out TWTR, but better to manage it!
Plus this would be a great opportunity to deploy $SQ's online payment API in a scaled experience. squareup.com/us/en/townsqua…
It would help diversify the revenue stream away from advertising & the cyclicality (or eventuality as Mahaney said) the platform experiences.
It would help diversify the revenue stream away from advertising & the cyclicality (or eventuality as Mahaney said) the platform experiences.
Those are my thoughts here in a nutshell. Unfortunate the major progress on user growth gets masked by an unforced error, but props to the TWTR team for the accomplishment and go execute on righting the wrong, while making things even better from here.
