New Twitter CEO Parag Agrawal not to change course despite Jack Dorsey resignation

    Twitter Inc.'s new CEO Parag Agrawal told investors they shouldn’t expect major changes to the company’s product now that co-founder Jack Dorsey has stepped aside.
    By: BLOOMBERG
    | Updated on: Feb 10 2022, 23:59 IST
    The logo of US social network Twitter displayed on the screen of a smartphone in Toulouse, southern France.
    The logo of US social network Twitter displayed on the screen of a smartphone in Toulouse, southern France. (AFP)
    The logo of US social network Twitter displayed on the screen of a smartphone in Toulouse, southern France.
    The logo of US social network Twitter displayed on the screen of a smartphone in Toulouse, southern France. (AFP)

    Twitter Inc.'s new Chief Executive Officer Parag Agrawal promised to push projects through faster, but told investors they shouldn't expect major changes to the company's product or business growth strategy now that co-founder Jack Dorsey has stepped aside. Maintaining the status quo seemed to be the theme of Twitter's fourth-quarter earnings call Thursday, during which the company reported holiday sales and user growth that mostly met Wall Street expectations, but didn't go much beyond that. Twitter also announced a $4 billion stock buyback, which helped buoy shares. The stock was up about 1% as the market opened in New York.

    Revenue in the holiday quarter rose 22% to $1.57 billion, slightly less than analysts had predicted but suggesting the company has weathered recent changes by Apple Inc. on data privacy better than some larger rivals. Sales in the current period will be as much as $1.27 billion, Twitter said Thursday in a statement, while the average analyst projection was $1.26 billion. The company added 6 million new users in the fourth quarter, bringing average daily active users to 217 million. 

    San Francisco-based Twitter is entering a new chapter in its history, following Dorsey's unexpected resignation in November, and Agrawal, a former chief technology officer, taking the top job. Pressure is on Twitter to move faster in building new products, and the company set ambitious revenue and user growth goals at an analyst day last year to convince skeptical investors that it was serious about expanding its business. While Twitter has grown steadily for years, its stock gains have lagged behind industry peers.

    Speaking on a call with analysts, Agrawal said he felt an “urgency” to execute on the company's strategy. Agrawal and Chief Financial Officer Ned Segal said the company is sticking to the goals set last year, including increasing annual revenue to $7.5 billion and getting to 315 million daily users by the end of 2023. 

    What's changing is the pace, Agrawal said. He vowed to increase accountability, make decisions faster and to improve product execution. “One of the the things we've constantly been focused on is how we go faster,” he said. “My focus has been on improving our execution. I bring a strong amount of urgency to this role.”

    The lackluster revenue forecast for the first quarter is due in part to Twitter's recent sale of ad platform MoPub, Segal said. MoPub brought in $281 million in revenue last year, including $51 million during the first quarter. Twitter sold MoPub to AppLovin Corp. for $1.05 billion in cash in a deal that closed on Jan. 1. Employees who were working on MoPub have started developing other advertising products, Segal said. 

    “We think we can make up some of that in 2022,” he said in an interview, referring to the revenue hit. “But we should be able to make up all of it in 2023.” Twitter said it expects full-year revenue growth in the low- to mid-20% range in 2022 excluding MoPub sales. Wall Street analysts on average estimate Twitter's revenue will increase by 20% in 2022.

    In order to reach its user growth goal of 315 million daily users by the end of 2023, Twitter will need to grow its audience by 45% over the next two years. In 2021, Twitter's user base grew just 13%. 

    Executives say they are confident they can still hit that user growth goal by making it easier to sign up to Twitter, and increasing the relevancy of its algorithm to show people better tweets. Segal said the company saw a 25% increase in the fourth quarter in the number of people who came to Twitter each day to create an account or resurrect an old one, a sign there's a lot of interest from people in joining Twitter. 

    The social network also said that recent Apple privacy rule changes, which now require companies like Twitter to explicitly ask for permission before collecting data from users on Apple devices, will have a “modest” impact on business moving forward. Twitter, Meta Platforms Inc.'s Facebook and other online platforms use information collected from mobile devices like iPhones to target users with advertising.

    Unlike social media competitors Meta and Snap Inc., Twitter makes most of its money from brand advertising, which requires less targeting data than other types of online ads, known as direct response ads, that aim for a specific outcome -- like the installation of an app. Meta, which also owns Instagram, estimated last week that the privacy changes will cost the company $10 billion in advertising revenue this year.

    While Twitter's focus on brand advertising may be helping to avoid a major disruption, the company is also trying to build more demand for direct response ads, which can be more lucrative. Eventually, the company hopes that 50% of its advertising revenue will come from those kinds of highly targeted ads. Today, just 15% of Twitter ads are considered direct response.

    The $4 billion share repurchase authorization will replace a $2 billion plan approved a few years ago, which was a little more than halfway complete. In the new plan $2 billion will be an “accelerated share repurchase,” according to a letter to shareholders. 

    Bloomberg Intelligence analyst Mandeep Singh said the accelerated buyback is likely due to pressure from activists, which also drove the CEO change. “The buyback seems timely given the valuation multiple compression we have seen in social media names since January,” Singh said.

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    First Published Date: 10 Feb, 23:59 IST
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