Twitter said on Thursday that “bugs” in its ad-targeting system would wipe tens of millions of dollars from its revenues this year, after admitting that it shared some users’ data with advertisers without their consent.
The San Francisco-based company’s shares fell sharply in early trading, down 18 per cent to $31.93 — a move that threatened to reverse most of the stock’s gains so far this year.
Twitter’s third-quarter revenues rose 9 per cent year on year to $824m, $50m short of Wall Street’s forecasts. Net income also took a hit, falling to $36.5m. After adjusting for a large tax benefit in the same quarter a year ago, its profits plunged more than 50 per cent.
“Despite its challenges, this quarter validates our strategy of investing to drive long-term growth,” said Ned Segal, Twitter’s chief financial officer. “More work remains to deliver improved revenue products.”
In its quarterly letter to investors, Twitter set out a series of problems affecting its ad business.
It said that since the end of June, it had discovered “bugs that primarily affected our legacy Mobile Application Promotion (MAP) product, impacting our ability to target ads and share data with measurement and ad partners”. MAP is a tool that advertisers use to promote their smartphone apps. It also suffered a glitch with its personalisation technology, which it said was “not operating as expected”.
Without these setbacks, Twitter’s revenue growth rate would have been 3 percentage points higher, it said.
Both bugs relate to an issue first disclosed in August, when Twitter admitted that it had failed to obtain consent from some users to share “certain data” with “advertising partners” and other third parties. The problem with users’ privacy settings emerged in May 2018 and was fixed in August 2019. Twitter also said that it had shown some users personalised ads without their permission for almost a year.
Addressing these mistakes meant that Twitter had less data available to target ads, which brought down the prices it was able to charge to advertisers.
“You trust us to follow your choices and we failed here,” Twitter said in August. A spokesperson added on Thursday: “We’ve notified those impacted, and the appropriate regulators.”
It was not just the two technical mis-steps that affected advertising revenues in recent months. Twitter said that it also faced “greater-than-expected seasonality in our advertising business that began in July and continued into August”.
However, the ad- targeting problems have not been resolved. Twitter said that could mean sales in the fourth quarter would be as much as $100m less than investors had hoped for. It now forecasts revenues of $940m to $1.01bn for the current quarter, which is typically the most important time of the year for advertisers.
Mr Segal added on a conference call on Thursday that there would be “some continued impact” from the advertising issues into next year.
Despite the problems in its advertising business, Twitter has sustained its recent recovery in audience growth.
Total average monetisable daily active users rose 17 per cent year on year to 145m. Jack Dorsey, Twitter’s chief executive, said its users had responded well to its efforts to crack down on bullying and other abusive content, as well as making it easier for people to “find what they are looking for on Twitter”.
