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Where Twitter’s opportunity lies in 2021

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Yahoo Finance’s Brian Sozzi, Julie Hyman, and Myles Udland break down Twitter’s latest quarter with Jason Helfstein, Oppenheimer Managing Director and Head of Internet Research.

Video Transcript

MYLES UDLAND: All right, another stock on the move this morning following its results out last night, that is Twitter. Stock is up almost 9% in premarket trading here with the company coming out last night. Slight miss on the monthly daily active user number that saw the stock down a little bit in the initial reaction last night. But we see here a beat on the top and the bottom line. Stock is higher here as we get today's session underway.

Joining us now to talk more about Twitter's latest quarter is Jason Helfstein. He's a managing director and analyst over at Oppenheimer covering the internet sector. Jason, thanks so much for joining us this morning. I'd love to just start with your thoughts on Twitter's quarter and sort of where you see, how you see momentum building within the business, one that I think investors for a long time have been waiting for maybe some quarters like this to get strung together.

JASON HELFSTEIN: Sure, thanks for having me. So it's well known that the digital ad market is recovering. This is kind of the last of the bigger platforms to report. So the fact that they kind of, they saw an acceleration in business from 28%, to 28% from 14% in the third quarter revenue growth, I don't think that was surprising. I think really the tone here is that a lot of the product changes that they last quarter threw cold water on, particularly their map ad targeting product, they now said is fixed and ready to go, and they formally relaunched that on February 8, so just a few days ago.

And they said that that, even in the fourth quarter when it wasn't fully going, that map product was up 50% year over year. So I think investors, while they were so negative on kind of product delays and kind of, why can't you just kind of move the ship forward, are now much more upbeat on what the company can do from a product standpoint from here.

JULIE HYMAN: Outside of the fundamental business, sorry to take a bit of a left turn here, Jason, but on the call, Dorsey was asked about Bitcoin, which I think a lot of companies, particularly tech companies, are going to get questions about following Tesla's move, and also because Dorsey has talked about Bitcoin in the past. And he said you know, it's something that we would look at. Do you think Twitter should buy Bitcoin?

JASON HELFSTEIN: I don't think it was that. I think he was talking about like block, like blockchain and the idea of centralized versus decentralized. So the idea of part of the social media platforms have gotten to a point where the discussion of like who should decide what the conversation is. Are social media platforms editors? Or are they just distribution platforms? And that's the whole Section 230, which is probably a whole other interview.

But the idea of how can you decentralize information so that the users are the ones deciding whether my post is appropriate as opposed to some editor sitting in Twitter's office or in Facebook's office. Or the algorithm, because somebody does have to write the algorithm. So I think it just, that was the, I think that was the gist of the question.

I mean, obviously, Dorsey runs Square. That's, they're probably, the Bitcoin questions are much more for them. But I think it just the idea like where are we going from here on who is the editor of the conversation. And I think Dorsey would like to empower the masses to find a way to using technology to effectively edit themselves.

BRIAN SOZZI: Jason, just switching gears slightly, so they talked a little bit on the call last night about their subscription product. To me, it didn't sound like it's going to be a large type of product, or they're not going to put the whole site behind a paywall. And that might come, some form of subscription product might come next year. Are you disappointed by what they had to say on that? And how big do you think that business could be for them?

JASON HELFSTEIN: They do have an Analyst Day coming up, and I think they're purposely saving details on that for the analyst call. So look, I think a lot of us, and especially you all in the media business, we're all trying to figure out what is the future of digital media, digital journalism. And I think there's this building idea of like the freemium model, which is you get the first paragraph for free, but if you want the meat of the story of the article, you have to pay.

And a lot of different models have emerged that way. Twitter is in such a great place to help be a distribution monetization platform like that, because while Twitter is much smaller than the other social media platforms, the uses of Twitter tend to be much more engaged on a news side. People are going to Twitter for news. Whereas I'd really argue, people are not going for Instagram for news. They're not going to Snapchat for news. They might consume news while they're there, but that's not the main reason. So look, I think they're really well positioned. I think they purposely didn't really want to steal the thunder for their upcoming Analyst Day.

So I think it was kind of just their way to say we'll talk about it later. But I do think you will get some formal product announcement. I think they used this call much more to talk about what's going on with Fleets and Stories and some of the other things that are driving engagement, because really, if you look at this company, in the US, they have 37 million mDAUs. Snapchat has 92, and Facebook is 195. And that's just the US. So this company from a product standpoint, has a long way to go to the extent that most people should care about content on Twitter.

MYLES UDLAND: And Jason, related to that question about, and you brought up that Analyst Day is an event they haven't had in seven years, the product cadence has certainly picked up with Fleets. Spaces is getting rolled out. They acquired Review. I guess there was one or two weeks ago. How much is that, in your view, Elliot's involvement here? And how encouraged do you think some investors are by having an activist in the company that is forcing them to maybe change some of the malaise I think some folks thought had maybe set in there over the last couple of years?

JASON HELFSTEIN: Yeah, I mean, it's very hard to know. I mean, it probably, I don't think you could say it has no impact. Is it the entire driver? I mean, look, at the end of the day, the people of this company you would imagine want to succeed and be their best. And I mean, look, they bought back $250 million of shares in the quarter out of a $2 billion authorization. Relatively small, but moving in the right direction.

Again, they're having the Analyst Day. Maybe they wouldn't have had an Analyst Day. Maybe they, all these products would happen and Dorsey would kind of just let them come out as they come out as opposed to on an Analyst Day, you have a lot of pressure to kind of preview the future. And some companies don't like doing that.

What if the product isn't ready on time? You don't want to rush out product that's not ready. I mean, we've seen that happen probably at Twitter sometimes and other tech companies. So it's very hard to say, but it probably has had some positive impact. And also, look, I mean Dorsey did agree to kind of this annual review of him. And I don't think that he would have agreed to that if it wasn't for the activists.

MYLES UDLAND: And Jason, real quick before we let you go, thinking about the other companies in your coverage area. You cover Uber, Amazon, Netflix among others. Is there any company that's quite like Twitter, where it's modestly sized, but everyone has a take on it, everyone is on it all the time, everyone's obsessed with the company. And yet, I think it's relative import in the market is probably maybe a little bit less than how much you and I certainly talk about it or think about it, spend time on it and so forth.

JASON HELFSTEIN: Yeah, I mean, I think you go back to the numbers. So I think because you're in the media, you think everybody's on it. The reality is, there's only 37 million people who are kind of captured in that active daily. Those are logged in active daily users. So again, versus Snapchat, just 92, which only has historically younger people. And Facebook's 195.

So I think the whole point is, that while those of us who are in finance or media, sports people tend to be aggressive users of Twitter, the mainstream population does not use Twitter on a regular basis with a logged in account. And that is the opportunity for this company by improving the product and making it easier to use.

MYLES UDLAND: I'm not sure we all do our part in making it a fun place to hang out, but it is certainly one that we have not managed to quit at this point. All right, Jason Helfstein, Managing Director over at Oppenheimer. Jason, really appreciate you taking some time to talk with us this morning.