Its latest revenue figures beat analyst expectations but the company will incur more costs in 2021 by increasing R&D spending.
Twitter’s revenue was up 7pc in 2020 but the company expects to take a hit with spending this year as it ramps up investments in engineering and research and development.
In the fourth quarter of 2020, Twitter booked a record $1.29bn in revenue, a 28pc year-on-year increase. It ended the full year with $3.7bn in revenue.
Advertising revenue for the quarter, which makes up the bulk of earnings, was up 31pc to $1.15bn. Ad spending dipped during the US election but picked up again for Christmas.
The results surpassed Wall Street expectations but the social media firm flagged that it would continue to spend on more R&D, which grew in 2020 compared to 2019.
It said that it expects further costs in these areas as it plans to grow its workforce by 20pc in engineering, product, design and research.
Much has been speculated about Twitter’s future and new features. It recently acquired newsletter platform Revue, likely in a bid to take on Substack and other newsletter start-ups that have gained a lot of traction of late. The social media platform is also reportedly considering subscriptions for certain advanced features to decrease its dependence on ad revenue.
Twitter reported that it now has 192m monetizable daily active users or mDAU, a metric it uses to measure accounts that log in daily, are active on the platform and can have ads served to them.
It has been a wobbly few months for Twitter, which had some impact on its user numbers.
The quarterly results cover the period of the US presidential election, where the company was under immense pressure to tackle and remove misinformation on its platform. In January, Twitter permanently banned former US president Donald Trump from the site in the days after the attack on the US Capitol.
“[In] the months leading up to the US election we launched a series of policy, enforcement and product changes to add context, encourage thoughtful consideration, and reduce the potential for misleading information,” the company said in its letter to shareholders.
“Some of the changes were very effective, and we will continue to build on them in the weeks and months ahead, while others were less effective and, as a result, have been discontinued. In aggregate, the discontinued changes had a small but measurable negative impact on global mDAU in Q4.”
Twitter said that it expected this negative impact but it was “well worth the effort” to address misinformation during the election cycle.
It also joined a chorus of other companies, including Facebook and Snap, that have voiced concerns over changes to Apple’s iOS14 and its impact on ad targeting. Twitter said it expects a “modest impact” by the change. For the first quarter of 2021, Twitter expects a drop in revenue to between $980m and $1.04bn.