Brief:

• Twitter reported total revenue increased 9% year-over-year to $824 million in Q3 earnings results released Thursday. Advertising revenue grew 8% YoY to $702 million, with the U.S. seeing gains of 10% YoY to $465 million. Cost per engagement also dropped 12% YoY.
• Advertising revenue growth fell considerably short of the $756 million projected by analysts surveyed by FactSet, according to CNBC. Twitter said overall revenue was down three or more percentage points due to "revenue product issues," a reference to ad-tech bugs that became apparent earlier in the quarter. Greater-than-expected seasonality from advertisers also hampered performance, the company said.
• Average monetizable daily active usage (mDAU) jumped 17% YoY to 145 million in Q3. MDAUS — essentially logged-in users who see ads on a given day — is a special metric Twitter introduced in place of reporting monthly active users. It is not widely adopted among social media platforms.

Insight:

Twitter had a harsh comedown after whiffing hard on advertising revenue, with stocks tumbling roughly 20% in pre-market trading, according to TechCrunch.

Around Q2 earnings, which bested analyst expectations, the company projected a slowdown in third-quarter growth due to the deprecation of older ad formats and other tweaks. Unexpected glitches in its ad targeting and personalization tools appeared to have compounded on the situation and put Twitter in a weaker position heading into the key fourth quarter and holiday season.

The ad-tech bugs hit Twitter's legacy mobile application especially hard, per a letter to shareholders. It's a problem the platform believes will reverberate, potentially cutting YoY total revenue growth in Q4 by four or more percentage points. Twitter has factored those headwinds into its updated outlook for the year.

Beyond hurting the bottom line, Twitter's tech issues could affect user trust at a time when data privacy scrutiny is high. The company recently apologized for applying people's personal information, including phone numbers, for ad targeting purposes without their consent. At the time, the company also announced it would cut off third-party data sources from its ad-buying system, reflecting changes that competitors like Facebook have made in the wake of privacy scandals.

Stronger growth in mDAUs might provide a silver lining for Twitter, and in a statement, CEO Jack Dorsey called out improvements to overall platform health for users. More than half of the tweets removed for containing abusive content in Q3 were flagged without a bystander or first-person report, the executive said.

Twitter has continued to retool its advertising business, shifting more of a focus to formats like video. In August, the platform introduced an ad-bidding solution intended to increase the adoption of short-form video among advertisers. Through the feature, Twitter will only charge advertisers if their video is watched for six seconds with 50% of pixels in view.

The platform will continue to lean into new ad offerings, along with special deals like its content pact with NBCUniversal around the 2020 Olympics that includes livestreamed programming, as points of interest for brands moving into next year.

"Despite its challenges, this quarter validates our strategy of investing to drive long-term growth," CFO Ned Segal said in a statement. "More work remains to deliver improved revenue products. We'll continue to prioritize our ad products along with health and our investments to drive ongoing growth in mDAU."