Timing is half of everything—and recently, there’s a sharp divide between pre-COVID information (mostly useless) and post-COVID information (good, if recent).
On February 6 (read: pre-COVID), Twitter forecasted to investors that Q1 revenues would be 5 to 12 percent higher in 2020 than they were in 2019. Last week, Twitter said, “cancel that growth, we’re probably gonna have a slight decline instead.”
Because all of Twitter’s revenue comes from advertising, it’s been a decent barometer for the whole digital-ad market. Just how big a hit is Twitter taking here, and what should the rest of the advertising world expect?
First, let’s cut into Twitter’s math a little bit. It made its earlier, more optimistic estimates almost halfway through Q1—which means that (A) it was seeing positive trends at that time and also that (B) it had no idea what was about to happen. In other words, January and the first part of February were looking good… it’s only when we get to March that stuff totally hits the fan.
So if Twitter is changing its Q1 forecast, it’s specifically because the company is having a rough March. And because it’s basically saying March will not only cancel out the growth (i.e. stagnation) but create an overall decline for Q1, we’re talking about a REALLY rough month here. eMarketer estimates that Twitter’s March revenues will drop between 9 and 40 percent, with the best bets seeming to fall near the middle of that range.
Does this mean we should expect the same kinds of change across the digital-ad market? Yes and no. We’ll mention a couple details in either direction and let you feel it out from there:
YES — Many of the forces behind Twitter’s decline in revenue are macroeconomic; in other words, they affect the whole system, not just specific sectors of it. Whatever is affecting Twitter’s ad revenue at a high level is also likely to affect other players selling ad inventory. Simply put, businesses won’t be buying ads from ANYONE if they’re unable to sell stuff because of supply-chain issues—or worse, if they simply can’t spare the cash to run ads effectively.
NO — Twitter’s revenue might not be as good a “barometer” for the whole digital-ad market in these unusual conditions, since a lot of ad buyers are being forced to tighten the belt and focus their priorities on the highest-volume, best-converting channels. Twitter’s share of the market is fairly small and has been shrinking slowly over the years, which means Twitter is bound to suffer before bigger players like Facebook.