twitter (twtr) earnings report: q1 2016 conference call ... · conference call transcript ... the...

CompanyName:T witterIncCompanyTicker:T WT RSector:T echnologyIndustry:Internet

EventDescription:Q12016EarningsCallMarketCapasofEventDate:11.92BPriceasofEventDate:17.75

©2014TheStreet,Inc.Al l R ightsReserved Page1of22

Twitter(TWTR)EarningsReport:Q12016ConferenceCallTranscriptThefollowingTwitterconferencecalltookplaceonApril26,2016,05:00PMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

KristaBessinger;Twitter;IRJackDorsey;Twitter;CEOAnthonyNoto;Twitter;CFOAdamBain;Twitter;COO

OtherPart icipants

AnthonyDiClemente;Nomura;AnalystCoryCarpenter;JPMorgan;AnalystRossSandler;DeutscheBank;AnalystHeathTerry;GoldmanSachs;AnalystEricSheridan;UBS;AnalystBrianWieser;PivotalResearchGroup;AnalystBrianNowak;MorganStanley;AnalystAndrewBruckner;RBCCapitalMarkets;AnalystJamesCakmak;MonnessCrespiHardt;AnalystDanSalmon;BMOCapitalMarkets;AnalystPeterStabler;WellsFargoSecurities;AnalystYoussefSquali;CantorFitzgerald;AnalystBrianPitz;Jefferies;AnalystKennethSena;EvercorePartnersInc.;AnalystJohnBlackledge;Cowen;AnalystMarkMay;Citigroup;AnalystRonJosey;JMPSecurities;AnalystAaronKessler;RaymondJames;AnalystJamesLee;CLSA;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

Goodday,ladiesandgentlemen,andwelcometotheTwitterQ12016earningsconferencecall.

(OperatorInstructions)

Iwouldnowliketoturnthecallovertoyourhost,KristaBessinger,SeniorDirector,InvestorRelations.Pleasegoahead.

KristaBessinger (IR):

Hi,everyone.WelcometoourQ1earningsPeriscope.WehavewithustodayourCEOJackDorsey;COOAdamBain;andCFOAnthonyNoto.




Wehopeyou'vehadachancetolookatourshareholderletterwhichwepostedonourInvestorRelationswebsiteshortlyafterthemarketclosed.

Likelastquarter,we'llbeginwithjustafewpreparedremarks,beforeweopenthecalldirectlytoyourquestions.DuringtheQ&A,we'lltakequestionsaskedviaPeriscopeandTwitter,inadditiontoquestionsfromconferencecallparticipants.TosubmitaquestionviaTwitter,pleasedirectitto@TwitterIRusingthehashtag,TWTR.

We'dalsoliketoremindeveryonethatwe'llbemakingforward-lookingstatementsonthiscall,suchasouroutlookforQ2and2016,andouroperationalplansandstrategies.Actualresultscoulddiffermateriallyfromthosecontemplatedbyourforward-lookingstatements,andreportedresultsshouldnotbeconsideredasanindicationoffutureperformance.

PleasealsotakealookatourfilingswiththeSECforadiscussionofthefactorsthatcouldcauseourresultstodiffermaterially.Theforward-lookingstatementsonthiscallarebasedoninformationavailabletousasoftoday'sdate,andwedisclaimanyobligationtoupdateanyforward-lookingstatements,exceptasrequiredbylaw.

Alsoduringthiscall,wewilldiscusscertainnon-GAAPfinancialmeasures.ReconciliationstothemostdirectlycomparableGAAPfinancialmeasurescanbefoundinthetablesinourshareholderletter.Andthesenon-GAAPmeasuresarenotintendedtobeasubstituteforourGAAPresults.

Andfinally,thiscallinitsentiretyisbeingbroadcastoverPeriscope,andbeingwebcastfromourInvestorRelationswebsite.AndanaudioreplayofthiscallwillalsobeavailableviaTwitterandonourwebsiteinafewhours.

Andwiththat,IwouldliketoturnitovertoJack.

JackDorsey(CEO):

Thanks,Krista.Hi,everyone.Thanksforjoiningus.

Acoupleofthingsbeforewestartwithyourquestions.

Thisisourfirstquarterlyupdateafterlayingoutourlong-termstrategyandpriorities.Andaswesharedlastquarter,ourfocusisonlive.

Twitterhasalwaysbeenthebestplacetoseewhat'shappeningnow,whetherit'sbreakingnews,entertainment,sports,oreverydaytopics.OnlyTwitterletsyouconnectwithpeopleanywhereintheworldwithliveconversation.

ThinkofPresidentObamacongratulatingElonMuskonthehistoricSpaceXlanding,ortheworldcelebratingthelegacyofthelegendaryartist,Prince.OnlyTwitterletsyoufollowthesehistoricmoments,joinintheconversation,andshareitwithothers.

Wemadealotofprogressonproductinnovationthisquarter,particularlywithlivevideoandourrefinedtimeline,andpeopleloveit,withlessthan2%optingout.Weremainfocusedonimprovingourservicetomakeitfast,simple,andeasytouse.

WealsoannouncedasignificantdealwiththeNFLafewweeksago.Assoonasweannouncedthatdeal,almosteveryleagueintheworldcontactedus,becausetheywanttoprovideanevenbetterexperiencefortheirfans.

Andwiththat,we'llmoveontoyourquestions.





Great,thankyou.Sabrina,we'rereadytogoaheadandtakethefirstquestion,please.

QUESTIONS&ANSWERS

Operator :

(OperatorInstructions)


AnthonyDiClemente,Nomura.

AnthonyDiClemente (Analyst-Nomura):

Thanksalotfortakingmyquestions.OneforAnthony,andoneforAdam.

Iknowyoudon'tgiveforwardguidanceonusersortheactiveusertrajectory,Anthony,butcanyoujustgiveusorspeaktotrendsthatyou'reseeingintermsofnewusersadded,resurrectedusers,andretention?

Ithinklastquarteryoutalkedaboutusersfromperformance-basedmarketinghavinghigherretentionrate,andobviouslyifyouwanttogiveusguidanceonusersfornextquarterIthinkwe'lltakeit.

AndthenanotheroneforAdam.Intheshareholderletter,ittalkedaboutbrandmarketersnotincreasingspendasquicklyinthefirstquarter.Irealizethatmonetizationisstillgrowing,butintermsofthedecelerationaredollarsshiftingbacktotraditionalmediaplatforms,doyouthink,aretheyshiftingtoothermajoronlineplatforms?

Iguessinyourconversationswithbrandmarketers,howaretheylookingatthestrengthsorweaknessesoftheTwitterplatformversusothermajormediaplatformsthatbrandmarketersmightpursue?

AnthonyNoto (CFO):

Thanks,Anthony.I'lltakeyourfirstquestion.IntermsofMAUgrowth,theprimarydriversofMAUgrowthinthequarterwerebothseasonalityandmarketinginitiatives.Ofcoursethecontinuousimprovementinourproductunderlinesthebenefitinseasonalitythatwe'reseeing.It'sjustnotlargeenoughforustobreakitoutspecifically,butaswetalkedaboutintheshareholderlettertherearecontributionsthere.

Asitrelatestothefunneldynamics,webenefitedinthequarterfrombothanimprovementinthetopofthefunnelaswellasretention,andagaintheretentionimprovementsreflectacontinuousimprovementintheproductstartingtoimpacttheabilitytoretainalargertopofthefunnelthisquarter.

IntermsofouroutlookforQ2,we'renotprovidingaQ2MAUoutlook.InthepastwhenwehaveprovidedanMAUoutlook,it'sbecausewefeltthereweresomeunusualunderlyingtrendsthatweneededtopointout,andthat'snotthecasetoday.

AdamBain (COO):

Anthony,I'lltakeyourquestionaroundtheadvertisingside.Ontheadvertisingsideoverallaswementionedbrandspenddidn'tgrowasquicklyasweexpected.Inthequarter,videowasstrongbutthatwaspartiallyoffsetbysomesoftnessthatwesawinolderlegacybrandproducts.Sothesearepromotedproducts,forexample,withoutvideo.Intermsoftheopportunityahead,weseeaclearopportunityaheadtoincreaseourshareofthebrandadvertisingmarketespeciallyaroundvideo.Someofthesenewvideoopportunitieswill,webelieve,growbudgetsthatwehaveaccessto.




Wealsohearfrommarketersthatthere'snothingintheworldlikeTwitterintermsof,asamarketingplatform.Twitteristhatliveconnectiontocultureformarketers,andthat'sbothuniqueandspecialinthebranduniverse.Liveiswhat'smostvaluableintheadbusiness.Sotomakethisevenmorepowerfulwe'reworkingonsomevideotools.Thesearethingslikeregionfrequencyplanning,demographictargetingandverification,whichwe'llrolloutthiscomingfalltocoincidewithourNFLdealandourlive-streamingstrategy.

AnthonyDiClemente (Analyst-Nomura):

Thankyou.


DougAnmuth,JPMorgan

CoryCarpenter (Analyst-JPMorgan):

Hi,thanksfortakingthequestion.ThisisCoryCarpenterforDougAnmuth.MaybejustaquickquestionontheNFLdealwhichyouguysdiscussedintheletter.Couldyoumaybejusttalkthroughhowyouthoughtaboutitfromauseracquisitionorengagementperspective,andmaybealsohowyou'rethinkingaboutitintermsofmonetization?Thankyou.

AnthonyNoto (CFO):

Sureandthankyouforthequestion.AsJackmentioned,Twitterhasalwaysbeenknownfortheplacetogotoseewhat'shappeningintheworldrightnow.Andwebeenreal-time.Thereasonwebeenreal-timeisbecauseourTweetspubliclyavailableforeveryonetosee,andthey'rebroadlydistributed,andliveisthebestmanifestationofreal-time.Wealreadyhaveliveconnections,liveconversations,andlivecommentaryontheplatform,andit'sanopportunityforustoaddlivepremiumcontenttothoseconversationsandthatcommentary.

Andsoyes,theNFLdealisimportantandI'lltalkaboutthatinmoredetail,butwe'refocusedonlivepremiumcontentinallthesports,news,andpolitics,aswellasentertainment,tobringtogetherforouruserswhatthey'realreadytalkingabout,whattheyalreadycareabout.

AsitrelatestotheNFL,weknowthatonThursdaynightsduringthethreehourtelecastofThursdayNightFootball,wehavemillionsofuserslookingatTweetsaboutthatgame.Andthey'recreatingtensofmillionsofimpressionsthatweknowareveryvaluabletothemandveryvaluabletoourpartners,boththeNFLandofcourseouradvertisers.

Andsobeingabletobringthelive-streaminggameintotheproductwiththatlivecommentary,thoseliveconversations,isacompletesolution.Andit'sacompletesolutionforthosetensofmillionsthatarealreadyonourplatformandcareabouttheNFL,andthetensofmillionsofNFLfansthatarenotontheplatform.

Andsoweseeitasaproductthatwillthesameforloggedin,loggedout,andsyndicatedusers.It'sthesamevideo,thesameads,thesameanalytics.AndwecandeliverinaninstantaverytransparentwaytotellpeopletocometoTwitteranddeliveronthatinstantly.

We'vetalkedabouttheimportanceofusclearlycommunicatingourvalue,anddeliveringonitinstantly.Livesports,livepremiumcontentisawaytocommunicatesomethingthat'sveryfamiliartopeople,somethingweknowtheywantbasedontheirinterestsonTwitter,andtodeliverthatinaninstant,notjustwiththatlivevideobutallthegreatconversationandTweetsthatareattachedtoit,andexpose




thosethathaven'tusedTwittertothatgreatcontent,andthosethatare,acompletesolution.Sowe'rereallyexcitedabouttheopportunitytouseitasacompletesolution.

AdamBain (COO):

Ontheadvertisingside,wecontrolsomeoftheinventoryinthepregame,inthegame,andalsopost-game.Thisfollowsalongamulti-yearthree-yearhistorythatwe'vehadwiththeNFLbringingpremiumcontentontotheplatform,andalsobringingitouttoMadisonAvenue.

Thedemandforthisprogramhasbeenincrediblystrongformarketers.Onlyhaditinmarketforaboutaweek,we'vealreadysigneduponemajorsponsorshiptothepackage.It'simportanttonotethatsponsorshipactuallywasfundedfromvideobudgetsinsteadofsocialmediabudget.Soit'sagoodexampleofhowthelive-streamingstrategythatwehaveoverallisaidingourabilitytogoafterthesevideobudgetsthatwetalkedaboutcomingthisfall.

JackDorsey(CEO):

AndIwanttopointoutthatthiswatchingwithTwitter,watchingaliveeventhasbeensomethingwe'veseenfornineyearsnow.It'sprettyphenomenalandthisisreallyaboutmakingsurethatwemakeiteveneasierforpeopletoseethesegames,andtoseetheseevents,andactuallyTweetaboutthem.

ButmoreimportantlytheygettoseeallthecontentonTwitterrightaway,soaveryeasywaytogetin,sotheycanseealltheindividualproducedcontent,includingthepremiumcontentaswell.

CoryCarpenter (Analyst-JPMorgan):

Thankyou.


RossSandler,DeutscheBank.

RossSandler (Analyst-DeutscheBank):

Thanks,Krista.IjusthaveoneforJackandonefollow-upforAdam.Jack,therewasanumberofcommentsintheletteraboutincreasingengagement,socanyoujustparsethatoutalittlebitforus?Whatkindofincreasesorimpactsareyouseeingfromthenewalgorithmictimeline,andgiventhatyoumadeabunchofdifferentchangestothecoretimelineproduct,what'sthebestwayforustomeasuretheincreasesinengagement?IsDAUoverMAUstillthemostimportantmetric,andifsohowdoesthatlookcomparedtopriorperiods?

AndthequestionforAdam,justtofollowupfromthepreviousquestions,howdoestheoveralladmarketlookheadinginto2Q?Doyouexpecttheworkthatyouguyshavebeendoingaroundimprovingmeasurementandtargeting,particularlyontheDRside,tostarttohelptheadrevenuegrowth,andifso,whenshouldthathappenthisyear?Thanks.

JackDorsey(CEO):

Thanks,Ross.Therefinedtimelinewe'rereallyproudof,we'rereallyproudofwhatit'sbeendoingfortheservice,andwhatit'sbeendoingforpeopleusingTwitter.

Asyouknowalotofourfolksspendthemajorityoftheirtimeinthetimeline,andthemoretechnologyweapplytothis,whileatthesametimegivingpeoplecontroltotailortheirexperience,thebettereffectswesee.




We'veseenincreasesinTweetsandrepliesandRetweets,andalsolikes,obviously.Sowewanttocontinuetomakesurethatwe'rerefiningthattimeline,andmakingitbetterandbetterandbetter,sowhenpeoplecomebacktoTwittertheyseewhatismeaningful.Andaquickpulltorefreshandtheygorightbackrecency.

I'llletAnthonytakethesecondpartofyourquestion.

AnthonyNoto (CFO):

Sure.Ross,asitrelatestoengagementwehaveanumberoffactorsthatwelookatasitrelatestoengagement.Theonethatisprobablythemostimportantisdailyactiveusers,andit'sonethatwecontinuetofocuson,aswellasanumberofotherfactorsincludingsearchesanddirectmessages.Sowe'llcontinuetolookatthatmetricaswellastheothersthatwehavetalkedaboutinthepast.

AdamBain (COO):

AndRoss,toansweryourquestionontheoveralladmarket.Ifwelookacrosstheboard,wegrew,wehadstronggrowthinternationally,46%oninternationalgrowthex-FX,and39%growthheredomestically.

Welook,internationally,wesawacrossEurope,somemarketerswhoheldbackspendinthefirsthalf,holdingitbackfortheOlympicsandthingsliketheChampionsLeague.ThereweresomeotherareaslikeBrazilandsomeothermajorcategories,tech,QSR,andretailasgoodexamplesofbigcategoriesthatwerealittlebitsofterthanweexpected.Thejury'soutabitsincethewholecategoryhasn'treportedyettoseehowthat'sgoingtoshapeupacrosstheboard.

ToyourpointaroundQ2,we'regoingtocontinuetomoveourmarketersfromtheselegacyPromotedTweetsintoPromotedVideo.PromotedVideoperformsincrediblywell.Wejustrecentlyhavegottenbackareturnonadspendstudyforvideoduringthispastfallseason.Wesawa$6returnonadspendforamajorbeveragemanufacturer,soforeverydollarthattheyputinTwitter,itreturned$6backattheregister.Theytoldusitwasbestincategory,andsowiththattypeofROIwe'regoingtocontinuetomovepeoplethroughvideo.

Intermsoftargetingcreativeandmeasurementonthedirectresponsesideofthehouse,we'vegotalotunderwaythere.OnepointthatI'llmakeisaroundourdynamicproductads.Whenwelasttalkedatearnings,DPAshadjustbeenintoanearlybeta.We'venowexpandedthebeta.Atthetimewewereseeinga2Xliftinclickthroughrate.We'renowseeingasustainedrateof2Xliftinclickthroughrate,andwe'realsoseeingtwicetheconversionratethroughthefunnel.

Sothosestrongresultsmeanthatit'sreadytoopenupevenmore.DPAstakealittlebitoftimeforamarketertoimplement,soinQ2we'regoingtostartopeningitupthroughtheAdsAPI,sopartnerscanhelponboardthemaswell.Soweshouldbereadyforthefallback-to-schoolseasonandtheholidayinQ4season.


ThenextquestionfromTwittercomesfromtheTwitteraccountofArvindBhatia,andheasks,isthereawaytoquantifyhowmuchTwitter'sadvertisingrevenuewillbenefitfromtheelectionthisyear?

JackDorsey(CEO):

Sowerenotgoingtogetintothequantificationoftheelections.Ithinkaswethinkaboutwhetherit'stheOlympicsortheelectionsorthingsliketheEuroLeaguechampionships,there'sahugeopportunityforconsumersonTwittertoseereallyrelevantcontentnow,andcertainlymarketersandcontentpartnerstohaveaccesstonewproductsandfeaturesthattheydidn'thavethelasttimeeachoneoftheseevents




happened.

DuringtheseeventsisreallywhenTwittershinesformarketers.Theseliveaudiencesandtheconnectionthatmarketerscanhavetothemarerareintheonlineadspace,andsowestandoutfromtherestofthemarketaroundtheseevents.

Wethinkabouttheelections,directresponsepartofelectioncycleswhichisaroundfundraising,marketerscannowbringtailoredaudiencestobear.

IntheOlympicswe'regoingtoseealotmorevideoandvideoadvertisingbeingused,sowethinkthere'sgoingtobegreatopportunitiestoshowcasehowfarwe'vecomesincethelasttimearound.


HeathTerry,GoldmanSachs.

HeathT erry(Analyst-GoldmanSachs):

Youmentionedtheincreaseinadloadduringthequarter.Iwaswonderingifyoucouldgiveusasense,howmuchoftheslowdowningrowththatyou'reprojectingforQ2isfromamorelimitedabilitytoincreaseadload,andaswestarttothinkmoreandmoreaboutthenetworkopportunityoffofTwitter,howdoyouthinkabouttheopportunitytherefromanadloadperspective?

AnthonyNoto (CFO):

Thanks,Heath.Intermsofadload,adloadinQ1wasdownsequentiallyfromthefourthquarter,sonoinventoryissueinQ1.Aswelookthroughtherestof2016andbeyond,theareasthathavethemostincrementalgrowthinmonetizationwouldincludeinternationalhometimeline,andinternationalnon-hometimeline,USnon-hometimelines,loggedout,andsyndication.

Wealsohaveasignificantopportunitytoincreasetheyieldofthecurrentinventorythatwe'reselling,improveitsmonetization,andthat'sfromanumberoffactors,continuetoscaleouradvertisers.Ourgoallong-termistohavemillionsofadvertiserslikeourcompetitivepeers.That'sabigdriverofcontinuedimprovementoftheyieldofourcurrentinventorythatwe'reselling,inadditiontothefactthatwe'refocusedontargetingcreativeandmeasurementthatwillalsodriveyield.Sothosearethebiggestopportunitiesaswelookforward.

AdamBain (COO):

Heath,andonthetopsidewhatwe'reseeingfromastrategystandpointisthatdirectresponseadvertisersarereallyrespondingwelltothenewinventorythatexistsacrossTwitteraudienceplatform.We'reseeingactuallyadvertisersthataretesting,DRadvertisersthataretestingintothosenewareasofinventoryactuallygrowbudgetwithus,sowe'reofftoagoodstart,that'sagoodsignthere.

HeathT erry(Analyst-GoldmanSachs):

Great,thankyou.


EricSheridan,UBS.

EricSheridan (Analyst-UBS):

OntheEBITDAmarginobviouslyyoushowedatremendousamountofleverageinthemodelinQ1,ontheEBITDAline.WantedtounderstandbetterwhatdrovethatleverageinQ1.Andthenalsoontheflipside




onstock-basedcompensation,thatcontinuestorunalittlebithigherthanwhatwethoughtinsomeofthefutureperiods.Maybeyoucangiveinvestorssomesenseaboutstock-basedcompensationmighttrajectlonger-term,thanks.

AnthonyNoto (CFO):

Sure.Wehadaverystrongquarterontheprofitabilityfront.EBITDAmarginonagrossGAAPrevenueof30%,evenhigheronanetrevenuebasisexcludingTAC.Thequarterreallyreinforcesourbeliefoftheopportunitytodrivelong-termmarginsof40%to45%onanEBITDAbasis,relativetonetrevenue.

InfactourR&DexpenseandourG&Aexpenseasapercentofrevenuearealreadywherewewouldlikethemtobeinthelong-termtosupportthatEBITDAmarginasapercentofnetrevenueof40%to45%.

Theefficiencieswehaveinthequarteraredirectlyrelatedtoemployeeexpenses,infrastructureexpenses,andsoftwaredevelopment.

Aswethinkaboutthelonger-term,wearegoingtobalanceimprovementsinprofitabilitywiththegrowthopportunitiesweseeinfrontofus.Wewanttomakesurewe'recapturingthosegrowthopportunities,andinvestinginthemappropriatelytomaximizeshareholdervalueinthelong-term,butwewanttodothatinadisciplinedway.Socontinuedimprovementinprofitability,butnotsacrificingthosegrowthopportunities.

Q1happenedtobeaquarterwhichwedidlessinvestmentcomparedtoQ2.Andultimatelyourmarginsforthefull-yearreflectthelevelofinvestmentthatweplanonmaking,withsomelumpinessbyquarterdependingonthemagnitudeoftheinvestment

Asrelatestostock-basedcompensation,I'dmakeacoupleofpoints.It'sourgoaltogetourstock-basedcompensationasapercentofrevenuedowntothehighsingledigitsasapercentageofrevenuecomparabletoourcompetitivepeersinthetechnologysectorandtointernetinparticular.

We'vecontinuedtomanageournetandgrossdilutiononanannualbasistobeequivalenttowheretheyare,andultimatelythescaleonrevenueagainstthelargelyfixedcostordecliningcostwillallowustogetthereoverthenextcoupleofyears.


Great,thanks,andwe'lltakethenextquestionfromPeriscope.Thequestionis,whynotmonetizePeriscopeandVine?

AdamBain (COO):

I'lltakethatone.WeactuallyaremonetizingPeriscopeandVinebybringingthatcreativecanvasintoTwitterandallowingmarketerstobringthatcanvasintoTwitteranddotargetingcampaignsandmeasurementthroughthetoolsthatwehaveavailableontheplatform.WeplantoexpandthePromotedVideowithPeriscopeoptionformarketersthisquarterbybringingintheAndroidplatformaswell.Upuntilnowit'sjustbeenavailableoniPhone.

Weseenincrediblecreativityaswellrecently,withmarketerstakingadvantageofthePeriscopeoptioninTwitter.TwogreatexamplesofthiswereDoritosthatwentliveduringtheSuperBowlandpromotedthePeriscopeonTwitter,andalsoKohl'sthedepartmentstorewhowentliveduringtheOscarsandbroughtabehind-the-scenesredcarpetliveonTwitterthroughthePromotedTweetswithPeriscope.





BrianWeiser,PivotalResearch.

BrianWieser (Analyst-PivotalResearchGroup):

Thanksfortakenthequestion.FirstIjustwantedtodivealittlebitdeeperintothebrandspendinthequarter.Iwaswonderingtowhatdegreedoyouthinkthatnegativityoutthereintermsofsentimenttothepressorotherwisemighthaveimpactedhowbrandsarethinkingaboutit,andpartofthatistotheextentthatpotentiallythisrebounds,thatmightcontributetosomeupswing.

Aseparatequestionaroundthedynamicproductads,iswhatyou'reindicatingthat,you'resuggestingtherecouldbeaccelerationinthesecondhalffromdirectresponseadvertisers,anddoyouthinkthatwouldgenerallybenefitownedandoperated,orwoulditimpactnetworkinginventorymoreso?

AdamBain (COO):

Letmetakethefirstone.Idon'tbelievethatthatsentimentaffectedthebrandspend,andweseeacoupledifferentproofpointsonthat.

ProbablythebiggestproofpointisthatinQ1wegothroughanddostrategicupfrontdeals.TheseareourrelationshipssimilartoTVupfrontrelationshipswithourlargestadvertisersandalsoagencyholdingcompanies.SoinQ1were-signedthreeofourglobalagencyholdingcompanydeals.Thesearecenteredaroundvideoandtheseareallupcollectively40%year-on-year.

Ontheindividualupfrontsthatwedowithlargecustomerswealsoareupover40%year-on-yearwiththemaswell,whichindicatessomebackhalfopportunitytotheyear,especiallyaroundvideo.

ToyourpointaroundDPA,theDPAtechnologyisusingtheTellAparttechnology,sothisisthefirstrealexamplewehaveofbringingTellApart'stechnologyontoTwitter'sownedandoperatedplatform.It'sexposingustonewbudgets,theseremarketingbudgetsthatwe'veneverhadbefore.

Thesignsaregoodintermsofthelift,boththeclickthroughratesandtheconversions,whichshowthatit'sperformingformarketersallthewaythroughthefunnel.

Whatweneedtodonextnowisbringtheremarketingbudgetsontotheplatformatscale.Inordertodothatwe'relightinguptheseAPIpartnersandotherthirdpartiestohelpbringthatquickertotheplatform.

Willitwork?ItshouldworkfortheTwitteraudienceplatforminabigway,butitalsowillworkforTwitterownedandoperated,bothloggedinandalsologgedout,sinceremarketingbudgetscantakeadvantageofthetargetingthat'savailableforloggedoutusers.

BrianWieser (Analyst-PivotalResearchGroup):

Great,thankyouverymuch.


BrianNowak,MorganStanley.

BrianNowak(Analyst-MorganStanley):

--questions,Ihavetwo.Alotoffocusonliveeventsandliveaudiences,inthefirstquarterwehadtheSuperBowl.CouldyoujusttalkabouttheTwitterliveaudiencearoundtheSuperBowl,whatyousawin2016versus2015,howisitchangedyear-on-year,bigger,smaller,etcetera.

Andthesecondthingintheinvestornoteitsoundslikeyou'reprettyfocusedonspecificplanstogoafternewonlinevideoadbudgets.Canyoujusttalktosomeofthechangesyouseebeingmadetothevideo




adproducttogoaftermoredollars?Thanks.

AnthonyNoto (CFO):

Sure.IntermsoftheSuperBowlinparticularwehaven'tcalledoutthespecificperformanceofthat.OveralltheNFLforthefullseasonperformedverystronglyataTweet-impressionbasis,inadditiontotheliveaudiencethatwaswatchingTweetswhilealsothetelecastwindowwasopen.

AndsothosearetwothingsthatweanalyzeandofthetworeasonswhyweweresoaggressiveintryingtocreatetherelationshipwiththeNationalFootballLeagueinourfourthyear.That'sreallyextendingwhatwe'dalreadyhadforthreeyearsonAmplify.AndsotheNFLseasonwasarealsuccessonTweetimpressionsandthatliveaudiencemeasurement.

LetmeturnitovertoAdamontheonlinebudgets.

AdamBain (COO):

Yes,soontheonlinebudgets,theseareasetofbudgetsthatwedon'thaveexposuretotodaybecausetheyrequireacertainsetoffeaturesthatwe'reworkingonrightnow.Thesearefeatureslikedemographictargetingandvalidation,GRPandTRPtargetingandreporting,soit'safunctionofputtingthesefeaturesinplace.

Webelievethatwecantapintoincrementalvideobudgetswhenweputthosefeaturesinplace.ThefeaturesareactuallyindevelopmentrightnowandaregoingtobetimedtolaunchwithourNFLdealandourlive-streamingstrategyforthisfall.

AndasImentionedwe'realreadyseeinggoodresponsefromthemarketbythefactthatadvertisersarefundingforexampletheNFLdealwiththevideosideofthehouseinsteadofwherewetypicallypullmoneyfromontheonlineadbudget.


ThanksandthenextquestionwetakewillbefromPeriscope.Thequestionis,willyouincorporatePeriscopesduringtheNFLgames?

AnthonyNoto (CFO):

Thankyouforthequestion.ThegreatthingaboutTwitterandthethreebrandswehaveistheycanallworktogetherasitrelatestovideo,andpartoftherelationshipwiththeNationalFootballLeaguedoesincludePeriscopecontentshoulderprogrammingpre-gameandbehind-the-scenes,andthatwaspartofthedealthatwestructuredwiththem,andit'spartoftheotherdealthatwe'reworkingonwithotherlivesports,liveentertainment,andlivenewsandpoliticsopportunities.

Sowe'rereallyexcitedaboutleveragingallthreeelementsofitandit'soneoftheuniquethingsaboutTwitterthatwethinkcanpositionustocaptureourfairshareoftheseopportunities.


MarkMahaney,RBCCapitalMarkets.

AndrewBruckner (Analyst-RBCCapitalMarkets):

Hello,thisisAndrewonforMark.Justaquickquestion,withtheadditionoftheboardseatsandLeslieBerlandcomingon,wonderingwhatotherholesyou'relookingtofillonyourteam?AndwithregardtoLeslieBerland,ifyoucantalkaboutyourchangedmarketingstrategyifatall,oranyupdateonthe




marketingstrategy?Thankyou.

JackDorsey(CEO):

Yes,I'lltakethefirstpart,thankyou,Andrew.We'recontinuingtolookfornewboardmembersandyou'llseemoreadditionsthisyear.We'rereallyproudoftheadditionsofHughandMarthatoourboard;givesusalotofguidanceandaccountabilitytowhatweneedtodoasaservice.Myfocusisalotonrecruitingthisyearandspecificallyintoengineeringandintoproducts,sowe'relookingforawholelotmoreleadershipthere.

AnthonyNoto (CFO):

Asthenitrelatestomarketingstrategy,aboutayearagowetalkedabouttheneedandopportunityforTwittertoclearlycommunicateourvalueanddeliverinaninstant,andwetalkedaboutthatforthefirsttime.Wetalkedabouttheimportanceofproduct,content,andmarketingallworkingtogethersynchronouslytomaximizetheimpacttobeabletodothat.

Lesliehascomeinandjoinedtheteamandhasalreadyhadanimpact.She'sintegratedbothouradvertisingcrossfunctionalgroups,marketingcrossfunctionalgroups,sothosefocusedonadvertisersandthosefocusedonconsumersintoonecohesivecrossfunction.

Andthey'redevelopingfirstprinciples,they'redevelopinganintegrativemarketingplan,butultimatelyitstiesbacktothatoverallstrategyofcombiningproduct,content,andmarketingtodeliverintegratedexperienceforourusers,bothloggedin,loggedout,andsyndicated,sothatwecanclearlycommunicatethatvalueanddeliverinaninstant.Sowe'rereallyexcitedabouthavingherontheteamandshe'salreadyhadanimpact.

AndrewBruckner (Analyst-RBCCapitalMarkets):

Thankyou.


JamesCakmak,MonnessCrespiandHardt.

JamesCakmak(Analyst-MonnessCrespiHardt):

Hi,thanks.Adam,justwantedtotalkabouttheGooglerelationship.IunderstandDCMisgoingintoalphatesthereinthecomingweeks.Canyoutalkaboutwhatweshouldexpectandhowaccretivethisrelationshipcanactuallybe,aswelookintothesecondhalfofthisyear?

AndthenIguess,JackorAnthony,ontheusers,thisisobviouslysomethingthatgetsalotofscrutinybutyouhadtheDAUs,theMAUs,butatthesametimeyoutalkedaboutthe800milliononandoffplatform.Isuserseventherightwaytothinkaboutit?Justhowdoyouguysthinkaboutitinternally,andisthisametricthatweshouldcontinuetowanttosee?Thanks.

AdamBain (COO):

HiJames,I'lltakeyourfirstone.SoontheDoubleClicksideasyourecallthere'stwopartsoftheDoubleClickdeal.DCMasyoumentionedwhichisaroundmeasurement,andDBMwhichisaroundadbuying.

SoletmestartwiththeDCMpiece,measurement.Inthequarterweexpandedthebetaoveradozenadvertisersandwe'verunhundredsofcampaignsnowthroughDCM.Wehaveseentwothings.One,whenmeasuringdesktopimpressionstodesktopconversions,thedatalooksaccuratethroughDCMand




theresultsforTwitterforthesecampaignslooksstrong.Sothat'sgoodnews.

Whenontheotheredge,onothersideofthehouse,whenyoulookatmobileimpressionsthataremeasuredthroughDCM,thataremeasuringdesktopconversions,sothiscrossdevicemeasurement,whatwesawthroughthemeasurementperiodisthatsomethingthattheindustryoverallneedstoaddress,whichisthatthistypeofcrossdevicemeasurementoverallneedsworkfromanindustrystandpoint,andit'ssomethingthatwe'reworkingwithGoogletogetheron.

ItspartofthereasonwhywedidtheDoubleClickdealinthefirstplaceistohelpsolvesomeofthiscrossdevicemeasurementfortheoverallindustry.Thishitsusparticularlyinanacutewaybecause90%ofourimpressions,ouradimpressions,areonmobile.Socrossdeviceforusisareallyimportantpart.

OntheDBMside,GoogleengineersandTwitterengineersareworkingonthebuyingpieceforintegration.Webelieveit'llbeinbetainQ3.

AnthonyNoto (CFO):

Asitrelatestoyourquestiononusers,weliketorefertoitastheworld'sbestconnectedaudience.We'refocusedondrivingrepeatusageofthatconnectedaudience,andIdon'twantconfuseanyone,whenwesayconnectedwemeanconnectedtoeachother,notjustconnectedtoadigitalplatform.

Andthevalueofhavingthatconnectedaudienceallowsustobetheplacetofindoutwhat'shappeningintheworldrightnow,becauseconversationsarelive,commentaryislive,andittravelsaroundinstantlybecausetherearesyndicatedpartnersandbothourloggedoutandloggedinexperiences.

Sowe'restillabsolutelyfocusedontotalaudience,butwewanttoemphasizethepointthatwewantittobethebestconnectedaudience,whichreallyreflectsourpointofdifferencetoallthethoseaudiences.


Great,thankyou.Andthenextquestionwe'lltakefromTwittercomesfromtheTwitteraccountofEchoToAll,andheorsheasks,canyoutalkabouttheprogressthatyou'remakingondeveloperrelations?

AdamBain (COO):

Sure.SowerecentlyannouncedwithFabricthatwe'vecrossedoveranimportantmilestone,whichisFabricisnowtouchingover2billiondevices,whichisareallyimportantmilestoneanditshowsthatFabricisindispensablefordevelopersacrosstheboard.

TheotherpieceofourdeveloperrelationsismovingFabriccustomersalsothroughmonetizationtothedegreethatthey'relookingforhelp.UpfrommonetizationwesawstronggrowthinthequarterfromMoPub.Theamountthatwepaidtopublishersgrew80%year-on-yearfromMoPubsomoreaheadIthinkthere.


DanSalmon,BMO.

DanSalmon (Analyst-BMOCapitalMarkets):

Heyguys,goodafternoon.AcoupleofinitiativesyoumentionedwereespeciallyIthink,Adam,tohelpthevideobusiness,we'reexpandingdemographicandverification.MightthatbesomethingthatmerelypiggybacksonyourrelationshipswithNielsenandMoatoraretherenewthingstobeaddedthere?

Andthenmaybejustonefollow-upontherenewaloftheholdingcompanyupfrontrelationships.Just




interestedtohearhowmuchoftheuptickinspendfromthemandotherlargebrandadvertisersthroughthatprocesswascenteredaroundfootballandmaybeifthere'sawaytohelpusgaugemaybewhatasame-storesalestypeofnumbermightbeforthat?

AdamBain (COO):

Sure,soonthefirstone,Dan,onthedemographictargetingandalsoverificationofaudiences,itisgoingtobeanexpansionofourNielsenandMoatrelationshipsothatwecanbringsomeofthethingsthatvideoadvertisersarelookingtomeasureontoTwitterthathasn'tbeenavailablebeforeenmasse,andthat'soneofthethingswe'reteeduponforQ3asweopenupourvideoplatforminamajorwaytoalsocoincidewithourNFLdeal.

IntermsoftherenewaloftheholdingcompanyupfrontswedidthosebeforeweannouncedtheNFLdealandasImentionedthey'reup40%year-on-yearwhichindicatessomebackhalfopportunity.Thoseupfrontsarecenteredhoweveraroundvideoandsotheworkthatwe'vedonewithmarketersoverthelastcoupleofquartershasshownagreatresponseandsoIthinktheagenciesarelookingatthatandhavingenoughconfidencetoinvestinTwittergoingforwardespeciallyaroundvideo.

DanSalmon (Analyst-BMOCapitalMarkets):

Okaythanks,Adam.


PeterStabler,WellsFargo.

PeterStabler (Analyst-WellsFargoSecurities):

Thanksfortakingthequestion.Wantedtogototheguidance.Couldyouhelpmereconcileacoupleofthingshere?Sowe'rehearingprettystrongcommentaryregardingROI,newadvertisingproducts,measurement,etcetera,yetthesequentialguideisabitperplexingtous,asevenmaturemediacompaniesgrowing3%to5%ayearcanputupsequentialgainsinQ2.Soisthereasuggestionherethatcurrentadvertisersarepullingbackspendingasyouaddnewadvertisers,orifyoucouldjustprovidealittlemorecolorhere,that'dbehelpful.Thankssomuch.

AnthonyNoto (CFO):

Sure.Intermsoftheguidance,itreflectsacoupleoffactors.FirsttheresultsinQ1wereatthelowendofourexpectedrange.Theunderperformancerelativetothehigh-endoftheexpectedrangeoreventhemid-pointreflectedaweakMarch,andthat'sthemonthofthequarterthatunderperformed.

Obviouslywe'vegottenthroughAprilandhaveasenseforwhereAprilis,andthenexttwomonthsarereallycriticaltoachievingthefullquarteroutlookthatweprovided,orexceedingit.Andsowe'reprovidingyouthenear-termupdatethatwehave.Ithinkasitrelatestoadvertiserhealthandthestateofdemandfortheplatform,Adamcantalktothisinmoredetail.

ButIwouldjusttellyouthesamethingwetalkedaboutlastquarter.Wehaveanumberofdifferentchannels,anumberofdifferentgeographies,andourlargestchannelandourlargestgeographyisnowaboutdrivingshareofwallet,andthat'sourdirectsalesorganizationintheUS.Andsothepenetrationgrowthofthoseadvertisershaslargelyrunitscourse,andwe'refocusedondrivinggreatershareofwallet.

Andsosomeoftheslowdownthatyouseeisareflectionofthefactthatwe'removingfromtwodimensionsofgrowthforthatlargestgroup,largestdollarspendofadvertisers,toonedimensionof




growth.

AdamBain (COO):

AndPeterIwouldjustaddontopofwhatAnthonyjustmentioned,inourlargestmostmaturebrandchannelsweactuallysawgrowthinQ1onayear-on-yearbasisandweexpectthattocontinue.

EssentiallywhatweexpectinQ2howeveristhatmoreoftheseadvertiserswilltradeupfromtheselegacybrandPromotedTweetsintoPromotedVideoproducts.Againwethinkthisisagreatthingfortheplatformsincevideoconsumeslessinventory.It'sagreatthingforthosemarketers,theyseegreatROIwhentheyusevideoversustraditionalPromotedTweetproducts,andit'salsobetterforconsumers.ConsumersreportenjoyingthevideoadexperienceeventoagreaterdegreethanwhatweseeintraditionalPromotedTweets.

PeterStabler (Analyst-WellsFargoSecurities):

Thankssomuch.


Thanks.Andthenextquestionwe'lltakeisfromTwitter.ItcomesfromtheTwitteraccountofNeilCameronandheasks,doesartificialintelligencehaveamajorparttoplayinyourvisionforcustomerserviceonTwitter?

JackDorsey(CEO):

That'sagreatquestion.We'rereallyexcitedaboutmachinelearninganddeeplearningandalltheadvancesintechnologytomaketheexperiencebetter.Andit'sbestwhenthey'reappliedinavery,verythoughtfulway.Twitterhasalwaysbeenphenomenalforthepastnineyearsaroundcustomersupport.

We'vehadpeoplecomeontotheplatformtotalkabouttheirservice,totalkaboutabrand,totalkaboutaproducttheyjustbought,andthebrandsactuallyhaveaconversationwiththem.Andjustafewmonthsagowereleasedanupdatetothatexperiencewhereanybrand,anycompanycantakeacustomerserviceTweetprivateandactuallyhandlethesituationwiththecustomerprivatelyindirectmessaging,andalsogivethemfeedbackontheexperiencesoacompanycanknowhowwellit'sdoing.

Wethinkthat'sagreatwaytostart,butwe'realwayslookingfornewtechnologiestoapplytomakethateasierforcompaniestoaddressalloftheTweetsandtoaddressallthecustomersthattheyseeontheplatformonadailybasis.


YoussefSquali,CantorFitzgerald.

Youssef Squali(Analyst-CantorFitzgerald):

Thankyouverymuch.Twoquestionsplease.FirststartingwithAdam,giventhefocusonvideo,onPromotedVideo,canyoujusthelpus,one,understandhowyouactuallypricevideoontheplatform,andmaybethedifferential,ifthereisone,inpricingbetweenPromotedVideoandthePromotedTweetsconsideringthemigrationyoujustspokeabout.

AndthenAnthony,IthinkontheMAUissue,youtalkedaboutthemajordriversbeingseasonalityinmarketinitiatives.Canyouhelpusjustparseoutalittlebitwhatthesemarketinginitiativesthathadanimpactonthequarterwere,andthenwhenyousaynounusualtrendsyou'veseeninQ2whichisthereasonyou'renotnecessarilyguidingtoMAU.Arewetounderstandbythatthatwe'rebacktonormal




seasonalityforthatmetric?Thankyou.

AdamBain (COO):

Yes,great,I'lltakethefirstone.Sointermsofhowwepriceourvideoproducts,they'repricedonacostpervideoviewbasisversustheseolderlegacybrandPromotedTweetsarepricedonacostperengagement.

We'veseenvideobeamoreeffectiveadunitformarketers,especiallywhenmeasuringeitherthemindorthewallet.Youknowwe'veseenvideonowisadoublingofadrecallversustraditionalPromotedTweets.Marketersthatmovedintovideoalsosawalmosta30%liftinmessageassociationoradassociationversustraditionalPromotedTweets.Andthenlastlyan18%liftinawareness.Soultimatelyit'shelpingdriveallaspectsofamarketer'scampaignandobjectives,andvideoisjustperformingmuchbetter.

AnthonyNoto (CFO):

Youssef,onyourquestionasitrelatestomarketinginitiatives,acoupleoffactors.ThemarketinitiativesthatimpactedMAUgrowtharereallyaboutdigitalmarketinganditfallsintothreebuckets,performancebasedmarketing,digitalvideoads,aswellasdirectmarketing.

StartinginAugustof2014westartedtobuildaninternalteamthatcoulddodigitalandperformancebasedmarketingatscale.We'veslowlybuilttheexpertise,thedata,andthelearningtobeabletodothatatareallyeffectiveraterelativetolifetimevalue.Andsothat'swhatwerefertowhenwesaymarketinginitiatives.

AsrelatestoMAUguidancedoesnotmuchothercolorformetoprovideyouotherthaninthepastquartersthere'sbeensometypeofunderlyingtrendthatwasunusualthatweneededtopointoutandwe'rejustsayingthere'snotanunusualunderlyingtrendthatwasnecessaryforustopointoutforthisquarter.

Youssef Squali(Analyst-CantorFitzgerald):

Allright.Thankyouverymuch.


BrianPitz,Jefferies.

BrianPitz (Analyst-Jefferies):

Thanksforthequestion.Earlierthismonthtwonewboardmemberswereappointed.IthinkJackalsohintedthattherearemoreadditionstocomesoon.Anycoloronwhatotherskillsetsyou'relookingfortocompletetheteam,oranyinsightsonwhatyou'relookingfor?Thanks.

JackDorsey(CEO):

Thanksforthequestion,Brian.We'recontinuingtolookforpubliccompanyexperience,forglobalinternationalpolicyexperience,mediaexperience,morethevoiceofthepersonontheplatformthatwefind,sothatwecancontinuetobuildtherightproductandgettherightguidanceandperspectivefromtheboard,andwe'recontinuingtolookformorediversityonourboardaswell.

BrianPitz (Analyst-Jefferies):

Great,thanks.





Thanks,andthenextquestionwe'lltakeisfromTwitter.ItcomesfromtheTwitteraccountofNeilDoshiandheasks,canyoudiscusstheSMBopportunity?Howistractionandwhataresomeofthechallenges?

AdamBain (COO):

Sure.OntheSMBsidewewereuponayear-on-yearbasisoverallinactiveadvertisers,anditwasdrivenbyourSMBinitiatives.

SMBforusisanexcitingopportunitybecausewe'veidentifiedcloseto9millionbusinesseswhohavesetupshoponTwitterandareusingitorganically.Ourgoalistomovethose9millionbusinessesthroughthefunneltobecomeactiveadvertisersontheplatform.

AswethinkabouttheroadaheadinSMB,weseetheSMBeffortmirroringoureffortsindirectresponse.Aswe'veseensofaralotofthespendfromourSMBcustomersareintothingslikeourwebsitecardobjective,soourDRobjective,soaswemakeimprovementstotargetingmeasurementandalsoexposingthoseDRadvertiserstoTwitter'stotalaudiencewethinktheSMBbusinesswillgrowrightalongwithit.


KenSena,Evercore.

KennethSena(Analyst-EvercorePartnersInc.):

Thankyou.YoushowedaniceEBITDAleverageinthequarterbutInoticethatoverallR&Dspendisdownabout8%year-on-year.Sojustgiventhesizeoftheopportunitiesthatyouciteintheletterandtheinvestmentsthataremadebycompetitors,doyoufeelyou'reinvestingenough?

Andthenwemayhavemisseditbutwedidn'tseeanoffnetworkrevenueorTACdisclosure,Anthony,ifyoucouldprovidethataswell,that'dbegreat,thanks.

AnthonyNoto (CFO):

Sure,I'lltakethesecondquestionfirst.OurTACwasup57%andthatwillbeprovidedinthedetaileddisclosuresthatareavailableonourIRwebsite.

AsitrelatestoR&Dexpensewewentthrougharestructuringlastyeartorightsizetheorganizationsowecouldfocusondeliveringtheproductroadmapthattheteamhasbuilt.Wefeellikewehavetherightorganizationbehindthat.We'realwayslookingforgreattalentandretaininggreattalentandwe'llcontinuetofocusonthat.

InterestinglyenoughdespitethechangeinR&Dexpense,thenumberofsoftwareprojectsthatarebeingworkedoninthefirstquarterofthisyearthatwerestarted,doubledrelativetowhattheywereinthefourthquarter.Andinthethirdquarterwehadveryfewbecausewewereinthetransitiontimeperiod.

Sowehaveaverysizableengineeringproductanddesignteam.Theirworkisfocusedonourproductroadmap.It'sagreatalignmentandthat'sbestreflectedinthefactwehadsuchanincreaseinsoftwaredevelopmentprojectsinQ1.

KennethSena(Analyst-EvercorePartnersInc.):

Great.Thankyou.


JohnBlackledge,Cowen.




JohnBlackledge (Analyst-Cowen):

Great,thanks.Twoquestions.FortheDoubleClickpartnerships,willeithertheDCMorDBMpiecesbeoutofbetain2016,orarewelookingata2017eventatthispoint?

Andthenthesecondquestionwouldbe,haveyousaidwhatpercentofadrevenueistraditionalPromotedTweetsandwhatwastherateofchangeforthatadrevenueonayear-over-yearbasisin1Q?Thankyou.

AdamBain (COO):

Yes,soontheDoubleClicksideDCMisinbetarightnowasImentioned.We'veexpandeditbeyondadozenclientsandahundredcampaigns.We'regoingtocontinuetoexpandthebetaout,butwe'regoingtowatchthecrossdevicemeasurementpieceverycarefullyasImentioned.

Foruswhatwewanttomakesurewhenamarketer,especiallydirectresponsemarketer,runswithusthroughDCMisthattheyfullyunderstandthattheirmobileimpressionsthey'rerunningonTwitterofwhich90%usuallyoftheirimpressionsareonmobile,willmaptotheconversions,andthey'reabletodothemathcorrectlytogettotheconversionnumber.

OntheDBMside,engineeringishappeningrightnowtogettheDBMpipesinplace,soweanticipateabetaofthatinQ3andthenasmarketersseegoodROI,we'llopenitupfromthere.

AnthonyNoto (CFO):

AsitrelatestothelegacyPromotedTweet,bothrevenueintermsofyear-over-yeargrowthrate,whatI'dsayit'sstillaveryviableformatforadvertisingpartners.It'sjustbecoming,theirspendingisbecomingmorediversified.We'reseeingitmoveawayfromthattothesehigherperformingautoplayvideoadswhichareequallyvaluable.Andsothere'salittlebitofamixshift.

Butthatoverallpieisunderpressureandit'sstillasizablepieceofourrevenueandtohavethispointwe'reexcitedabouttheproductroadmapwehaveontherevenueproductside,wehopetoseethatdeliveredoverthecourseoftheyear.Butthatonelegacypromotedpieisunderpressure.

JohnBlackledge (Analyst-Cowen):

Thankyou.


Thanks.Thenextquestionwe'lltakeisfromTwitter.ItcomesfromtheaccountofRichGreenfieldandheasks,yourstrategyandfocusisreallycenteredonlive.HowdoesFacebook'sdesiretoownlifeimpactTwitter?

JackDorsey(CEO):

Thanks,Rich.We'vebeendoinglivefor10years,andwebelievewehavealeadershippotential.Wehavealeadershippositioninit,butit'snotjustaboutshowingaliveevent.It'salsoabouthostingaconversationaroundaliveevent.

Twitterhasalwaysbeenthebestplacetoseewhat'shappeningimmediately,toseewhat'shappeninginstantly,andtobringpeopletogetheraroundaparticularsharedexperience.Andaswetalkedaboutlasttime,wethinktheeasiestwaytogetwhatTwitteris,isreallytoshowaliveevent.




Showpeoplethegreataccountswhoareprovidinginsightthatyoucan'tfindanywhereelse,youcan'tfindinyouraddressbook,butyouactuallymeetonTwitterthroughthatexperience.Toconnectthemthroughafollow,andalsotoencouragetheminaconversation.

Andthatisexactlywhatwe'refocusedonmakingsurethatwecontinuetodo,becausewearepublicandbecausewearedistributedandbecausewearesimple,wearethefastestwaytoseethatevent,butitalsocangoeverywhere.Soitcanreachthat800millionaudiencethatwecontinuetogrowandcontinuetofocuson.

Andthenwe'reworkingonmakingsurethatwehavethebestexperienceoutthere,andusingtechnologyappropriatelytoincreasethatexperienceandtheenjoymentoftheexperience.

Periscopeisagreatexampleofthis,wherewethinkwedohaveasignificantleadershippositioninlive-streamingvideo,andwewanttomakesureit'sthebest,notonlyforbroadcastersbutfortheirfansandthefanbasethatwatchthosePeriscopes.


MarkMay,Citigroup.

MarkMay(Analyst-Citigroup):

Thanks.Ijusthadonequickquestionregardingyourcommentsintheletterthatyousawsoftnessduringthequarterfromsomeofthelargebrandadvertisers.Wouldyousaythatthatiskindofareflectionofwhat'shappeningatthemacrolevelorit'smorecompanyspecific,forinstancerelatedtothePromotedTweetstransitionthatyouhavereferenced?Thanks.

AdamBain (COO):

Yes,IthinkforusitreallyisaroundthetransitionfromtraditionallegacybrandPromotedTweetsintoPromotedVideo.Essentiallywhatweseetheadvertisersdoingistestingintothesehigherperformingunits.Theyhaven'tgrownthespendyet.

Webelievethatnewbudgetwillbeaddedwhensomeoftheotherfeaturesthatwehaveinplace,Italkedabout,liketheGRPbuyingorsomeofthedemographictargetingandverification.Intermsoftheeconomy,Italkedalittlebitaboutit--

AnthonyNoto (CFO):

--whatI'daddtothatisobviouslywewanttoseeallofourpeersreportandseealsowheretheresultsare.Whenwelookatourtop10verticalcategories,QSR,quickserverestaurantsaswellasretailweretwocategoriesthatperformeddecidedlylowerthantherestoftheoverallbusinesswhicharemacrodrivencategories.Sototheextentitimpactedeveryone,we'llhavetowaitandsee,butthat'stheonlyevidencethatwehaveinourresults.

MarkMay(Analyst-Citigroup):

Thanks,Adam,thanks,Anthony.


RonJosey,JMPSecurities.

RonJosey(Analyst-JMPSecurities):

Great,thanksfortakingthequestion.Ithinkyoumentioned,Jack,earlierthatposttheNFL




announcementotherleaguesandliveeventsreachedouttoyouall.Justwondering,canyoutalkabouthowTwitterisviewingsponsoredcontentversuspromotingthecontentthatusersaregeneratingviaMomentsandothertools?Thankyou.

AnthonyNoto (CFO):

Sure.Whydon'tIhopinthere,I'mnotexactlysurewhatyoumeanbysponsoredcontent.Weobviouslyhaveanadmodelthatmonetizesincrediblywell.It'llworkseamlesslywiththelivesports,livepoliticsandnews,aswellasourliveentertainmentproduct,bothintheformatthatwealreadyhave,aswellasautoplayvideo.

Andsotheopportunitytocreateeconomicvalueforourpartnersreallyfallsintoafewbuckets.First,wecanhelpthemreachayoungeraudiencethat'shardtoreach.Alargepercentageofourusersarethemillennialdemographic.Wecanreachaglobalaudience,andwecanreachamobileaudienceandreallyextendthereach.Wecanalsohelpdrivetuneintothosethatdohavelineartelevision,andareawayfromhome,ornotawareoftheprogrammingbeingon.Andofcoursewecanalsohelpthemgeneratemorerevenue,bothdirectlyandindirectly.

Andthatvalueproposition,inadditiontothethingsJacktalkedaboutintermsoftheinterestgraphandknowingwhoisactuallyinterestedinthatcontest,specificallybecausethey'refollowingthosetypesofaccounts,andlookingatthatspecifictypeofTweet,isreallypowerfulforustodeliverthemacompletesolution.

AdamBain (COO):

Ron,oneotherthingI'dmentionisintermsofoverallsponsoredvideocontent,wehadanothersuccessfulquarterofAmplify.Wenowareover300Amplifyvideopartnerssothisispremiumvideocontentthatpartnersarebringingontheplatform,sometimesexclusivelyontoTwitter.Andit'savailablenowin25countriessotrulyaglobaloffering.OverallweranhundredsofcampaignsinthequarterandwesawgreatcampaignsaroundMarchMadness,theGrammys,andSuperBowl.

Aswethinkabouttheyearahead,certainlythere'sabunchofinterestingeventscomingup,butthere'salsoabunchofalways-onopportunityforAmplifypartnerstospeakdirectlytotheiraudiencesandthenalsotocreateawin-winwiththemaroundmonetization.

RonJosey(Analyst-JMPSecurities):

Thanks.


Okay,we'lltakethenexttwoquestionstogether.They'reactuallyonefromPeriscope,onefromTwitter,fromtheaccounttmcmill81butthey'reveryrelated,soquestionfromPeriscopeis,areyouguysplanninganyacquisitionsalaPeriscope?AndthequestionfromTwitterisaroundplanstousethe$3.5billionincash.

AnthonyNoto (CFO):

Sure,theyaredefinitelyrelated.ThefirstpointI'dmakeisthatacquisitionshavebeencriticalincreatingvaluefortheInternetsector,consumerinternetsector,overthelasttwodecades.Manyofourcompetitivepeershaveboughtassetsattheveryearlystagesthathaveresultedinbillionsofdollarsofvalue,andTwitterhasbeenthesame.

TheacquisitionofVine,theacquisitionofPeriscope,ofFabric,arefoundationalacquisitionsthatare




allowingustocreatevalueforshareholdersbothnowandintothefuture.Andsothefactthatwehavetheamountofcashinourbalancesheetover$3.5billionleavesuswiththestrategicoptionalitytolookforthoseassetsthataregamechanginginthewayPeriscopeis,inthewayFabricis,aswellassomeofourotheracquisitions.

Andwe'refocusednotjustonconsumercapturedevicesbutalsofocusingonotheropportunitiesthathavescaledaudiencetoleverageourgreatmonetizationvehicle,andwe'realsofocusedonadtechnologytocontinuetobuildoutouradtechstack.Attheendofthedayourgoalistobeaone-stopshopforadvertisingandhavingbothownedandoperatedinventory,thirdpartyinventory,andadtechstackthatcanservebothofthoseconstituenciesisreallycritical.


AaronKessler,RaymondJames.

AaronKessler (Analyst-RaymondJames):

Yes,thanksguys,acouplequestions.Firstcanyougiveusanupdateontheloggedoutusermonetization,Ibelievethatwasinbetalastquarter,isthatstillinbeta,what'stheperformancethere,maybetimingtakingthatoutofbeta?

AndjustifyoucanprovideanupdateontheUIchangesintermsoffixingthebrokenpartsyoureferredtolastquarterspecificallythe@[email protected].

AdamBain (COO):

HeyAaron,I'lltakethefirstpartwhichisaroundtheloggedoutmonetizationupdate.WecontinuetoexpandthebetaacrossQ1.Weareencouragedbytheperformance.Whenyoulookatcostperclickrates,forexampleoneoftheDRobjectivesthatwehave,theCPCsarenearlyidenticalforloggedinandloggedoutfromasustainedbasisacrossthequarter,whichisagoodindicationfromadvertisersthatthey'reseeinggoodvaluefromloggedoutexperiences.

Inordertomakethatopportunityorrealizethatopportunitywerealizethatweneedtoinvestmoretoincreasetheamountofloggedoutimpressionsandoverallscaleoftheoffering.

JackDorsey(CEO):

Andonthebrokenwindowsandtheuserexperienceinparticularwe'relookingalotatconversations,conversationsisahugepartoftheplatformandthat'swherealotoftheconfusingaspectsofTwitterarethatweknowhasbeeninhibitingmoreusage,andyoushouldexpecttoseealotmoreupdatestotheconversationmodulesoverthisyear,andwe'rereallyexcitedtopushthemupbecausetheyclarifyawholelot,andwe'remakingconversationontheplatformaloteasier,alotmoreexpressiveaswell.

Wefocusedalotofourenergyrecentlyontheonboardingexperience,andwe'veseensomeprettymeaningfulgainshere.Wesawover48%increaseinfollowsand56%increaseinmutualfollows.Mutualfollowsarereally,reallyimportanttoretentionbecauseyou'regettingthatconstantfeedbackandyoucanhaveconversationontheplatformaroundit.Sowhatwe'redoingononboardingintotheflowisworkingandwe'regoingtocontinuetostrengthenthat.

AaronKessler (Analyst-RaymondJames):

Great,thankyou.





JamesLee,CLSA.

JamesLee (Analyst-CLSA):

Great,thanksfortakingmyquestion.ThisquestionisforAdamspecifically,withvideoadsrampingIassumeageandgendertargetingwouldbecomemoreimportant.Iwaswonderinghowdoyouaddressthatchallengewhenyou'relogindataisalittlebitmoreimplicit,andgiveusjusthowaccurateyouareintermsofpredictinggrowthfactors,andalsoonvideoadvertising,Adam,howmuchofyourTVorvideocampaignrightnowiscompaniontoTVversusstandaloneonyourplatform.Thanks.

AdamBain (COO):

Soonthefirstoneintermsofvideo,todoageandgenderwedoaskTwitterusersnowtoinputtheirbirthday.There'saspecialfeatureontheplatformwheretheygetbirthdayballoons.Thatdatahasbeenusefulintermsoftargeting.Genderweactuallyarehighlypredictiveonauser'sgenderjustbasedontheaccountstheyfollowandsomeotherfeatures.

Whatwe'reworkingonintermsofvideoismakingsureourdataassetmatchesthevalidationserviceslikeNielsen'sDAR.

Andonthesecondone,isthataquestionmoreaboutourconsumermarketingorsomeotherthing?

JamesLee (Analyst-CLSA):

No,it'smorevideoadvertising,whenyoutotalktoadvertisersingeneralaretheydoingparallelcampaignsontheirTVandalsoonyourplatformatthesametime,doyouhaveacompanionplatformorisitastandaloneplatform?

AdamBain (COO):

Yes,greatquestion,James.Yes,weareseeingmarketerslineupcampaignstogether.Thishashistoricallybeenanopportunityforusingeneral.What'sinterestingthoughiswestillseeatonofunderperformingdisplayadvertisingoutintheworld,andsowhatweseehappeningismoneyismovingoutofdisplayadvertising,traditionaldisplayadvertising,intocategorieslikethis.AndsomarketersultimatelyarelininguptheirTwitterspendwiththeirTVspend.

Essentiallywhatwe'vedonenowiswe'veproventhatwealreadyknowthere'sgreatTwitterROIwhenyoudothat,butthere'salsoprovengreatTVROI,andwe'vedoneabunchofresearchacrossmultiplecategories,whetheritbeautoorconsumerpackagedgoodstoshowwhenadvertiserslineuptheirbuysinthatway,itactuallyledtoinsomecasesovera10%liftintheirTVROI.

JackDorsey(CEO):

Allright,that'sallfornow,thankyouallforjoiningusandwelookforwardtotalkingwithyounextquarter.

Operator :

Ladiesandgentlemen,thankyouforparticipatingintoday'sprogram.Thisconcludestheprogram.Youmayalldisconnect.Haveagoodday,everyone.

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