Twitter (TWTR) Presents at Bank of America Merrill Lynch 2014 Global Technology Conference (Transcript)

Jun. 3.14 | About: Twitter, Inc. (TWTR)

Call Start: 15:15

Call End: 16:05

Twitter Inc. (NYSE:TWTR)

Bank of America Merrill Lynch 2014 Global Technology Conference

June 3, 2014 03:15 PM ET

Executives

Mike Gupta - CFO

Adam Bain - President, Global Revenue

Analysts

Justin Post - Bank of America Merrill Lynch

Question-And-Answer Session

Justin Post - Bank of America Merrill Lynch

Let’s get started with our Q&A session with Twitter. A couple of announcements; first of all, I am Justin Post, Senior Internet analyst. I want to thank everyone for coming to our conference this year. I’m very happy with the attendance and really appreciate you coming now. Secondly, there will be an event at 5 o’clock, cocktail reception. So we’d love to see you there. I think all the analysts to be there will be there, and some members from the management teams are here today. So hopefully you can join us for that.

And while you’re enjoying your lunch, we are very happy to have Twitter with us today. We have the CFO, Mike Gupta and we have Adam Bain, the President of Global Revenue. So I think the stock has been very volatile since the IPO. So I think it’s very fortunate to have them here, and I think people are still learning about the Company and forming their opinion. So very happy to have them here.

Mike Gupta

Thank you.

Justin Post - Bank of America Merrill Lynch

I got a lot to cover. I’ll probably do 30 minutes or so, and then we’ll open it up to the audience for questions. I guess since people really are figuring out Twitter and forming their opinions, maybe we will just start with how you see the Company on a big picture, and what are the key focus areas for Twitter today?

Mike Gupta

Sure, maybe I can start and Adam, he can chime in. We think Twitter is a platform that can be valuable to every person on the planet. And we think about focus, we think about executing and growing our business and making sure we’re delivering that value for all of our constituencies. So that’s our users, our platform partners and our advertisers. And when it comes to users, we think there are several things that we can do due to deliver value to current uses as well as potential users and we see that as a large opportunity. When you look at the market more broadly, north of 2 billion, almost 2.4 billion global Internet users today, soon to be North of 3 billion smartphone users, and we think all of those folks can benefit and drive value for Twitter.

And so when we think about the users, we’re focused on enhancing the product and investing it across probably four areas that are identified today. One is the new user experience and helping folks with that on boarding process, more and deeper integration of rich media into the platform, focusing on conversations on the platform and in particular leveraging our direct messaging features within the product; and then lastly organizing contents so that we can get users to the content they value more quickly and more efficiently. And then as far as actually maybe Adam if you want to chime on our platform partners.

Adam Bain

Sure, so on the platform partners, and the monetization side, I’ll talk about both. On the platform partner side, we’ve been working to deepen our relationship with publishers of platform partners and have them bring some of the very best content onto the platform and use it in really interesting ways. I’ll talk about that last bit here in a minute. They use it in interesting ways.

So we now have Twitter TV ratings active in 11 markets. For those that are familiar with here in the U.S., the Nielsen Twitter TV rating, this is the rating for engagements that you bring with the traditional TV ratings. If you think about how we’ve always measured TV around GRP or TRP, the Gross Rating Point, or Target Rating Point; is a measure of engagement as defined exclusively by Tweets and Twitter activity about TV shows, and it’s meant to layer on top of each other.

So you can now measure things that are at high reach but also high engagement or maybe even the money ball opportunity for TV viewing behavior which is something that’s a little bit lower reach, but equal or even higher engagements. So that’s active now, and working across the 11 different markets. So the Nielsen Twitter TV rating here in the U.S., the Ibope Twitter TV Rating in Brazil which is the rating consortium there, the Kantar Twitter TV rating for the BARB in the UK, and a whole host of markets like Japan; for example, the Video Research Twitter TV rating in Japan.

So we have seen adoption by the TV ratings consortium thinking about measuring that behavior based on Tweets and Twitter activity. And we’re also seeing it in different markets even outside of TV. So in the music space we just launched a platform with Billboard to look at the traditional way that we do music, musician and track rankings, but now based on tweets on Twitter activities.

On the monetization side, really marketers and agencies are really looking at three things. So these are three things that we have been focused on with them. One is engagement, two is scale and three is measurement. On the engagement side, really that’s the Twitter card, platforms are bringing -- we started with photos and videos and now a more interesting creative canvas that marketers can put against the platform.

Scale, this is heightened by our acquisition of MoPub which is one of the world’s largest mobile in-app ad exchanges. We touched over 1 billion iOS and Android users every 30 days or so, servicing tens of thousands of apps and just in the last 30 days alone we served over 130 billion ad impressions.

And in the measurement side we have been focused on helping marketers and agencies understand the ROI calculation, both on Twitter and then also our place in the world with television. That’s in things like closed loop measurement. So running campaigns on Twitter and then measuring what happens in the store. Conversion tracking, things that happen on digital; and also closing loop at with inside of digital.

And then also the connectivity between Twitter and TV. We have done a huge body of research to help prove the effectiveness when somebody runs a campaign on Twitter and TV at the same time and actually what that does for the end results.

Justin Post - Bank of America Merrill Lynch

Lot of seemingly convergence in the space, maybe Facebook is copying some of your stuff and vice versa. But really and Dick’s talked about real time and one too many a lot about what’s unique about Twitter. But how do you see Twitter being a real differentiated platform versus all the other opportunities? Lot of competition at the time out there.

Mike Gupta

Maybe I can start. And so it is, some of what Dick talked about, when we look at Twitter, we are the only platform that’s public, real time, conversational and distributed ad scale on a global basis. And it’s really the combination of those four things that makes Twitter unique and powerful. So when you think about the platform being public, it allows the platform to be accessible by anyone, to consume Tweets from anyone else. It gives people a broadcast mechanism for anyone to tweet out and broadcast their message and express themselves.

And when you think about that public nature, it also allows content to be distributed. So we talk a lot about the content on the platform but we see a meaningful amount of content being distributed off of the platform on to other forms of online, as well as even print and television. And so the public nature -- distributed [ph] nature reinforces the public conversation that we see on there. And then probably most importantly real time, where people turn to Twitter for what’s happening right now in their world or the world more broadly and they’re looking at what’s trending, what’s hot, what’s kind of happening at this moment. And we see that also pan out towards advertisers who find that to be very powerful.

Adam Bain

Yes, the marketer part of the story then becomes really interesting, because those features of live public conversation distributed then becomes super interesting for a marketer. How many -- real quick show hands, how many people actually use Twitter overall? So I don’t know about you. A lot of people in the room. I don’t know about you but when I touch the platform, I get in a different mode, a different emotional state. I get in this mode of what’s hot, what’s new, what’s going on in the world or what’s happening in my world? And so those are essentially the questions or the emotional state that the consumer comes to the platform with. The advertisers or the marketers then have a really relevant voice in answering those questions, what’s hot, what’s new, what’s going on the world or what’s happening in my world?

And so when we talk about what’s unique or different about the platform for marketers, it's really the emotional state or that state of mind that the consumers touch. When they touch the platform across mobile, whether it be a phone, a tablet, a desktop, they’re in a different data mine which we think is great and marketers are now knowing that it’s a great and unique difference.

Justin Post - Bank of America Merrill Lynch

So it does sound like it's pretty unique, the real time nature of the platform. How does the advertiser plan around that and build ads, because they don’t know what’s going to be really hot tomorrow.

Adam Bain

It’s a really great question. That’s part of what we’ve been doing over the last couple of years with the teams in market. I like to say the work that we’re doing to touch marketers and agencies is less about why Twitter and more about how Twitter. And so the team that we put in market is really masters in the house. And it runs the gamut of being prepared for these live moments. But it turns out you can actually plan for being live or plan for being in moment. In fact, it’s frankly -- some of the muscle movements that markers have always had in TV or in radio where you plan for different scenarios that are going to happen or unfold in a broadcast and then how you react or how you think that the audience would react to it.

So for example during this next World Cup that’s coming up, we’ve been in market in Europe working with agencies, actually doing a trial run of something we call live studio. So we show up, we bring a bunch of agencies into a room. Where we hold an all-day session. The first half of the day is giving education around best use cases. How to use the platform? Who is doing it correctly? How they’re doing it in the right way?

And then the second half is actually, we played all the World Cup games and actually stopped the tape at a certain moment and then had a conversation or actually watched each one of the agencies perform along the way. So this is something that we’ve also been doing at scale now for a little bit, part of our Starcom MediaVest Group announcement that we had a year ago, one of our big agency holding deals was also deeply rooted in education.

And so now with SMG, they've taken over 2,000 of their employees through an education module and they are now Twitter certified as a part of it. This is a series of reading materials and tests that they take on an automated basis that probably takes an average user over a month to actually complete on educating in the ways of how Twitter.

And I think it’s worth also pointing out, there are those large live events and those big moments but there's every day moments happening on Twitter all the time. So we talked about the Super Bowl, the 25 million tweets or the Grammy's 15 million tweets. With regard to music there is 3 million tweets, roughly 3 million tweets a day on the platform. There's over a million tweets about football on the platform every day. So there is these every day moments that advertisers are for and that’s a great point. You think about like the consumer packaged goods industry, taking a brand like cough syrup medicine.

Certainly live events live events are interesting, but just looking at people that are tweeting about the fact that they’re sick and can’t sleep at night makes an incredibly relevant canvas for that marketer to come in and in the moment be able to potentially answer consumer needs.

Justin Post - Bank of America Merrill Lynch

Interesting. When you look at the platform, it’s changed a lot over the last couple of years, right. We’ve got a long way from the 140 character text like Tweet, although even text is changing now, but you’ve got pictures and videos and all kinds of opportunities in there. What’s your vision for this -- the platform maybe two - three years out or what could be in there, what types of content and how people will use it?

Adam Bain

Yes, so the big innovation that’s come has been the launch of Twitter Cards. And essentially, Twitter Cards started with photos and videos, brining that closer into the Tweet. But we’ve quickly expanded that to do more. And when you think about Twitter Cards, we’re increasingly thinking about the tweet almost as a caption to do more. And there is a world now with -- inside of a tweet beyond photos and videos although, that’s interesting as well.

On the marketer side, we have expanded it out. There is a lead generation card. So if you are marketer looking to drive a lead, there is one quick way where a consumer is shown a button that says Request Information and that lead is transmitted on the backend to the marketer or app installed cards. If you are an app -- if you’re a game or an app and you want to find distribution on Twitter, there is really easy way now to showcase the app, the review, the rating and then also a button that says install, that drives an action. There is a whole post of these cards that we’ve been working to bring out to the marketplace and what we’ve seen is that increases both user engagement and also advertiser ROI.

Justin Post - Bank of America Merrill Lynch

I'm sure you were anticipating the user questions, so let's get that. We’ll get going here. Clearly, the user growth relative to where -- other social networks, we’re at the stage where it's on people’s mind. And so I guess walk us through your strategy to grow users. And then you saw 14 million quarter-over-quarter, which was better than Q4. I think you added 9. So little bit of improvement there. But were you happy with Q1 and how did you see that, that quarter?

Adam Bain

Sure, yes. So maybe stepping back when we think about user growth, absolutely a top priority for us as a Company. To give some context, when you look at the growth that Twitter has had historically, it’s been largely viral and organic and it’s only recently where we've really focused on user growth and we’ve done so by doing deep consumer research, really understanding the different use cases, understanding the pain points users have, and that has now informed our product growth.

And so we talked just a moment ago about some of the things we’re focused on, those four categories of the on boarding of the new user experience to the integration of rich media, the organization of content as well as the enhancing of conversations, that’s all driven by research we’re seeing. So you will continue to see us roll changes out over the course of the year. We’re experimenting all the time there are many experiments in flights as we speak. And some of that informs Q1. So when we look at Q1 14 million net adds, a nice increase over the 9 million we saw in Q4, that was some of the early signs we saw around these product changes we’re making and some of those product changes help with retention as well as some of the on-boarding. And so we feel like Q1 from that perspective, we’re successful and we’re seeing some of those of early signs. We feel like that 14 million is more in line with the average kind of quarterly growth you saw in 2013. So that feels good as well. Having said, as I mentioned in the earlier remark, we think Twitter can be valuable to everyone and so we’re really not going to be satisfied until we get further out on that curve.

Justin Post - Bank of America Merrill Lynch

Got it. Maybe talk about some of the changes that have excited you this year that you’ve made or had the most impact? Any comments there?

Adam Bain

Yes, so in Q1 in particular, so again testing a lot of things, we’re seeing a lot of good early results. In Q1 if I had to categorize, I put into two buckets, one is around Push Notifications and the other is around Mobile Sign Up. So when you think about push notification, these are either emails or text messages, potentially alerts that are going to our users and what we’ve been able to do in the quarter is really optimize those alerts, improve the quality of the content that’s coming with those alerts and maybe alerting people to conversations that are actually happening right now on the platform within their circle of followers, maybe alerting them to things that are trending in the moment or even alerting them to other folks who are following you people on the platform. So that type of content we found has been well received by the users and it’s really helped, and we’ve seen the uptick in the quarter.

On the mobile sign up side, probably two things I'd call out there. One is just the sign up flow itself. So we've really streamlined that from many steps down to only a handful of steps and not surprisingly as you remove friction, you tend to see higher conversion. So stepping back from a Twitter perspective, we see a lot people coming to the top of the funnel. That’s now a concern for us. Really the focus is how that we take folks from that top of funnel and convert them into a streamline even. That Sign Up flow has helped us on mobile and the other thing we’re doing on mobile is leveraging with the users’ permission, their mobile address book.

So once we have that address book, it allows us to give them a sense of who they are close to from that address book; who is on Twitter, give them the ability to potentially have some mutual follows right out of the gate and as you guys know for Twitter it’s an ASIC [ph] follow model, but what we found in some of research we’re doing is even having a couple of mutual followers really helps their level of engagement and retention on the platform.

So we think those are some of the things that -- again seeing early signs that we feel good about. And it may be helpful just to take you behind the scenes of how it all works as well. We just brought in a new head of consumer product, Daniel Graf, who was running Google Maps both on the desktop and then also I guess went into enemy territory and produced a pretty great mobile mapping product for all platform.

And what he just started -- so he’s been at the Company for a couple of weeks now. Essentially what the team does is there’s a list of both consumer acquisition and consumer retention and growth strategies that they’ve laid out. And then on a weekly cadence the team gets together and actually goes through each one of the list of projects. We push out tests to 1% of those users and then we watch data to see how it performs. And essentially the team gets together for a day to look through each one of the tests and how it’s performing and decide whether or not that it should go out, launch to the public or whether it should go through another route.

So there’s good science behind the scenes, behind each one of these product changes, and as Mike mentioned, there’s a couple certainly that are visible but there are hundreds behind the scenes that the team is looking at, making modifications. So any growth that you see may not be just down to one feature change but it may be a basket of changes that we’re testing or launching at any one time.

Justin Post - Bank of America Merrill Lynch

Is this test and learn new to the share would you say.

Adam Bain

From a cadence perspective, it’s definitely something that has stepped up. It’s not new to the industry. This is what other folks have done that come before us. But I think as Mike mentioned you know for very long growth which is something that just happened to the Company versus the Company taking an active role in changing that trajectory and so I think what you’re starting to see is the fruits of some of that labor.

Mike Gupta

And I would just add on that, we've developed what we wrote is a very robust mobile testing infrastructure. So it really allows us to a. b. test a lot of things simultaneously and have that out there as Adam said to 1%. So that infrastructure we developed recently, it’s robust.

Justin Post - Bank of America Merrill Lynch

And I know the company hasn’t disclosed actual churn numbers but how do look at it and are there a lot of inactive people that you could bring back quickly or is it, is that not really something that’s important to you?

Adam Bain

So we look at, think about it from a retention perspective and as I mentioned some of the changes we made in Q1 we see that that’s improving retention. So that’s really where we’ve focused. Again, not worried about the top of the funnel. We’re really worried about how do we retain those users who come in and how do we convert them. As far as kind of resurrecting less active users or older users that is something we can do. Things like push notification help us to bring folks back into the product and bring them into what’s current. But yes, that’s that, and often the question we get is actually in reverse which is, hey you’re adding new users. Are they engaged as they were before?

Mike Gupta

Yes, and they absolutely are engaged, so we see that new users on average are just as engaged as existing users and the changes we've made late in Q4 as we look forward to some of the thin line actions, you see that translate into the level of engagement at the tweet level. So things like favorites and retweets were up meaningfully in Q4, even within Q1 just from the beginning to end. That was up 26% as well.

Justin Post - Bank of America Merrill Lynch

Got it, let’s move off users. Maybe we'll open up to the audience in a few minutes but we’ll move on to the monetization side. So when you look at Twitter’s demographics and content, it must be pretty interesting and do you think that solves a unique niche for advertisers and how do you think it’s differentiated versus other platforms.

Adam Bain

Yes, so, part of your question is around I think targeting or just you know the state of mind that a consumer’s in and how do you take advantage of that. And I think you know for us, that old adage of you are what you eat, on Twitter it’s a bit of you are what you tweet, you are who you follow and you are what you retweet. So there’s a lot of really great public signals about what you’re interested in, what you’re passionate about, what you’re into, what kind of state of mind or mode that you’re in. And so we use those public signals to help bring relevance to the marketplace. It could be as simple as somebody tweeting about the World Cup, and an advertiser looking to target anybody that’s having a conversation about the World Cup; or it could be just in general somebody that’s interested in running and being able to target people that are interested in running.

One of the things, one of the enhancements that we’ve made this part quarter is the launch a product we called tailored audiences, and this is how do you actually get a little bit deeper down the funnel for marketers, especially in the direct response side. So what we’ve done with tailored audiences is allow them to bring CRM data onto the platform. So they’ve done offline segmentation of their audiences. They can now bring that into Twitter and actually match and find those users on the platform so that the marketing messages can be even tailored to the CRM knowledge that they have on that user. The other bit is around bringing remarketing under the platform. So if you have done an action with a marketer, like abandon a cart or gone to a landing page, when the consumer comes back to Twitter, the ads are more tailored based on what the marketer can now target.

Justin Post - Bank of America Merrill Lynch

Got it. And with that we’ve seen some pretty good success with Facebook on I guess a direct response site, especially app downloads. When you look at that or you just look at the industry in general, is that a big untapped opportunity.

Adam Bain

Let me give some context to you. So you know monetization on Twitter is only three or three and a half years old. So we’re fairly young and super early stage in the grand scheme of monetization. Others in our category, outside our category have been monetizing for eight years or longer. So we still ultimately are pretty early stage in this whole build out that we’ve got going on.

The other thing that we did, when we launched we actually went I think in reverse to what most platforms do. Most platforms start very focused roundup, direct response and then try to work their way up the brand. What I saw when I came to the Company 3.5 years ago was that big huge marketers were already on the platform. They were using it to drive marketing campaigns although there weren’t a lot of tools to do it. They were using it to drive press and PR and comps initiatives. They were using it to drive consumer behavior trends and understanding.

So I looked at it and said marketers are already here. The big marketers are already here. So we actually launched big branded marketing initiatives first. And then what you’ve seen is we’ve begun to work our way through direct response and small and mid-sized customers. Just even today, when you think about our sales channels, our self-served platform is really only live in a select set of the world. So it’s not broadly distributed yet. We’re working on bringing that out market to market to market.

And we’re launching products and services around direct response, whether it be conversion tracking or remarketing tailored audiences or Lead Gen cards or the OP cards that you talked about. The OP cards that we launched is an interesting product and a different and unique set of marketers. We have that in beta today with a small select group of marketers. And the performance that we’re seeing so far is good but its early days. What we’re doing with each one of those marketers is not just proving that we drove an install but actually proving that we drove quality. And so what we’re doing with those marketers is trying to understand downstream, for every user that installed the app that we were promoting, what happened next. Were they valuable? How were they valuable and what was the targeting that lead to that? So that ultimately -- past the beta period we’ll be in a good place to scale with those marketers.

The other thing that we announced for the app business is particular is not just running those on Twitter but also running off Twitter at the same time through our MoPub acquisition, the At Exchange business and beginning the first real set of campaigns that are running on Twitter and off Twitter at the same time.

Justin Post - Bank of America Merrill Lynch

Another huge opportunity is obviously TV advertising. You've mentioned working with rating agencies. But it doesn’t feel like anyone else in the space is really doing this. So maybe how -- obviously there's a lot of video advertising on the web, but how Twitter is unique working with the TV ad dollars and how you can get a bigger than fair share of it?

Adam Bain

Yes, so we took a different value prop maybe than other folks here in the valley, where we went out to the market, and actually showed that working with Twitter is a force multiplier to their core business. So instead of being competitive, it actually helps the core business. And here is how we did it. One is we spent years focusing on research and so there is a whole set of research that we rolled out with the broadcast partners and this is still going on by the way to actually prove that Twitter is and helps drive the television business.

Here is some of the things that we did. We worked with Nielsen Improved Causation. So there is a Nielsen Causation Study that shows when you watch or look at tweets about television shows, it causes consumers to tune in to the broadcast channel. In fact it showed that there are only three things that drive tune in and Twitter was one of those three. The others were last year’s ratings and how much marketing they’re spending to promote it on TV.

Two, we worked with specific network by network. So Fox for example just published study that showed over 90% of users who saw tweets about a Fox TV show drove to some action like tune in. So there was -- there's a bit of a direct response. It kind of makes sense, right. You look down at your timeline, you see somebody having a conversation about a moment in a show, it causes them to tune in.

And then we did some work on the ad side. So we worked with a company called Symphony. It’s actually a show that when people running tweets and TV commercials at the same time, it causes them not to change channels but actually to retain on the TV side.

And then the second one is with a company called Millward Brown. That’s a huge research company that showed that Twitter users in general when it ran with TV are more -- have higher purchase intent and higher ad recall of the TV commercial. So we set a body of work to help prove both to the broadcast community and to the marketers that it was good and then ultimately it helped not just digital ROI but it helped TV ROI. In that regard we’ve gone further downstream in the research side to prove that it helps TV ROI.

We walk into a market like in the UK and we’ve done a study in the UK where we take the top six of a category. So we use Telco. So we took the top six UK Telco providers and we looked at three years' worth of their television ad GRP and TRP, saw what was the reach on TV. Then we looked three years of their Twitter organic behavior and three years of their Twitter paid behavior and then we looked at years for each one of these six marketers of their syndicated sales data, so what were the outcomes. And we took at that data and gave it to a third party.

And what they were able to do was show when you just ran Twitter and what the outcome was. When you just ran TV and what the outcome was for each one of those marketers. And then when you ran Twitter and TV at the same time and what that outcome was; and for the Telco space, what the third party found is when you ran Twitter and TV at the same time, it lead to a cost for acquisition. So the cost to acquire a new mobile customer for these marketers decreased by almost 40%, when you ran Twitter and TV at the same time.

So again it’s trying to show that there is value when you run Twitter and TV. I think ultimately what we think is that there is a ton of underperforming display ads, digital display ads that are out there and that is the type of money that can move into Twitter and ultimately support TV campaigns.

And the last thing that we’ve done is we’ve gone out directly to those broadcast partners all across the world and created a way that they could bring premium, broadcast quality content, those moments, not the full set, but those moments that people will be talking about and bring it right on to platform. There's a program we call Twitter Amplify. We ran it this past year with the NFL. So during live NFL games we had live highlights. The moments that the highlight happened it was tweeted out. We’re doing it for the NBA playoff and finals here as well. There are close to 100sh of these partners now across the world. And there is also monetization opportunity.

So when we serve an NFL highlight or serve an NBA highlight or serve a content highlight, there is a pre-roll that runs right before it. That pre-roll is about six seconds before that moment of video, so accretive [ph] to our growing platform. And as a monetization platform that we share in the upside with the broadcast partners.

So what we’re trying to do holistically both on the measurement and on the ad products is actually show value to the TV industry that ultimately together we can build a very big business together instead of fighting for digital.

Justin Post - Bank of America Merrill Lynch

Are you encouraged by that early adoption and what you’re seeing?

Adam Bain

So what we’re hearing back from the broadcast partners is that it’s a refreshing take. That’s my background as I was at News Corp and FOX for 13 years before coming to Twitter. So I certainly the broadcaster point of view. And then on the marketer and agency side, essentially what it does is it brings great quality content that they can run on Twitter. So when you think about running a campaign 365 days a year on Twitter, it helps in terms of the advertiser, creating new content instead of essentially what they look at is this platform allows them to ride on connect that may be trending or maybe exciting for them to get in front of -- with a story telling method video that they are super familiar with.

Justin Post - Bank of America Merrill Lynch

13 years in the industry and you got hair in 10 years. I don’t know what, pick the wrong one. Great so we’ll get the microphones around. I’ll ask one more question on margins and then we'll see if there is anything else from the audience. So margins have been improving lately, but you’re kind of weighing investments, you’re still very early as a Company versus growth. So how you’re thinking about that and delivering to expectations but also making sure you’re feeding your growth engine.

Adam Bain

Yes absolutely. So very much focused on growth. As I mentioned we believe there's is a large opportunity ahead of us. As we just talked about, we’re investing in the product and we’re investing in the sales force, we’re expanding that internationally. So we will absolutely continue to make those investments. Having said that, we do have an eye on margins and investing wisely. So if you look at the guidance that I provided back on the Q1 earnings call, looking at that full year guidance that implies a 500 basis point expansion on the EBITDA line. And so you will continue to see us focus on expanding margins while still feeding the growth and investing on the growth and we think we can balance that.

Justin Post - Bank of America Merrill Lynch

We have a question over here.

Unidentified Analyst

Hi this (indiscernible), Justin’s colleague, covering software at Bank of America Merrill Lynch. Lot of the companies that I cover, Salesforce talked about becoming a digital marketing platform and they also talk about how marketers can use that platform to be able to do a multi-channel marketing on Twitter and Facebook, what not. Just curious from your perspective, where do you see the Adobes and Salesforce.coms of the world as it relates to working with you from a technology standpoint and a business, just a broad insight. That would be great. Thank you.

Adam Bain

At a high level we think those are help to the market. There are translation layer for three major things. Targeting creative measurement. And so if done the right way, they can help drive the execution of all the targeting innovation that we have. On the creative side, Twitter Cards ultimately can be helped by third parties that can plug in to the actual platform. And then certainly on the measurement side, there has always been a set of partners that can help translate and focus on measurement for the customer.

Those ones that you mentioned, whether it be the Adobes, the Salesforces or a whole host of other players in the ecosystem, are super valuable from our point of view. We have just opened up over the last couple of quarters the ads API. So a programmatic way that those third parties can actually look into the inventory and bring demand in. So it's super early from our point of view around that. And we also are spending time -- just like I mentioned on the education side with agencies like Starcom or WPP or Omnicom. We also are doing the same set of work, the how Twitter work for a set of third party partners. Its good time investment right now, because we think downstream is going to pay off in a decent way.

Unidentified Analyst

(indiscernible) with NW Capital. Could you speak to the Gnip acquisition strategy, the rationale behind it, because it almost sounds like you took Firehose data and bought the company that was just using Firehose? So what was the strategic rationale?

Mike Gupta

So as Adam mentioned earlier, we see on the platform brands, marketers, companies and even off the platform academics, journalist, et cetera, using the data from the tweets, almost 0.5 billion tweets a day; using the data from those tweets for things like trend detection, breaking news, sentiment analysis, et cetera. And in talking with folks we realized we want to bring that data thinking. So Gnip has built a great business on top of the Firehose with some amounts of datasets and filtering and algorithms. What we decided in talking with folks is the best way for us to make that data more accessible and to bring additional sophistication to the amount of intelligence if you will by filtering in the algorithms on top of to bring that in house, it also has the added benefit for us to then have these first party relationships with their many customers and the vast majority of the Fortune 500 or part of that customer base. So really it was about bringing the data back in or bringing sorry --bringing the data sets and algorithms closer to the data source and allowing us to go to market with a more fulsome service.

Adam Bain

Yes, it is one perspective from the marketer point of view. When we walk in and talk to a CMO, we don’t just walk in the paid advertising door. So as you think about all the lines, reporting lines that go up to a CMO they have in some way, shape or form, reason to be on Twitter. In fact some of our earliest, when we got in market like 3.5 years ago, we were actually called in to help mediate arguments between different parts of the CMOs reporting line because the maybe the comp theme was using a Twitter handle and the marketing team wanted to use it. And we were called in help give guidance around governance around who should use. In fact they've led to a whole new product set for us around permissioning for marketers and agencies to use platform.

So the advantage on the data side is we come in with insights and research and can help the PR and comps teams, can help the consumer trend detection teams, can help the customer service teams, as much as it is help the marketing teams on the how Twitter part of the journey.

Justin Post - Bank of America Merrill Lynch

Any other questions? All right, more of an industry question. Lots of acquisitions in the space, a couple of really big ones. But I guess how do you think about M&A in the social space and using your capital over time?

Mike Gupta

Yes, just generally as you’ve seen historically, we’ve been an acquisitive company and the number of acquisitions range anywhere from smaller talent acquisitions to larger more recent deals we’ve done with companies like MoPub or even Bluefin earlier last year. M&A is absolutely strategic. It's something we think about. The M&A we look for would be in support of the core business. So things we think that can help us maybe accelerate time to market, maybe fill some gaps that we have on the talent side or just kind of further some of the adjacencies we are going after. So, obviously nothing to announce at this point but it is something strategic and definitely something we think about. And obviously as a CFO I’ll tell you, we take a disciplined approach in looking at how we want to allocate capital towards M&A.

Justin Post - Bank of America Merrill Lynch

Okay. And then on MoPub, you brought it up a few times. Is that really a kind of a game changer for you with advertisers because you have such a broader reach outside of Twitter? And I don’t know what you can say about the financial of that. It's probably somewhat of a revenue share but is it that meaningful on the financial side?

Adam Bain

So yeah, let me talk a little bit about what it is and how we work with both other source (ph) and marketers. We saw MoPub sitting at the nexus of two of what we think are the most important trends in marketing, programmatic and mobile. As you probably know, about 80% or so of our usage is on mobile. We started as a mobile company and close to 80% of our revenue is on mobile. So we’ve got a huge stake around mobile.

When we started monetizing on mobile we realized that there were a bunch of problems when it comes to measurement attribution, a whole host of other things that you have to deal with that you don’t have to deal with on the desktop. So there are unique problems with inside of mobile. We saw MoPub which was sitting right at the nexus and it just made a lot of sense for us to bring it together with the platform that we have.

Essentially what they do is they go into a publisher and a publisher who is looking to drive mobile monetization is looking for a platform. They’re looking for a platform to help them around any of their ads. And it could run of whole spectrum of things from their own sales team using the ad platform to go out and sell or bringing in a bunch of different ad networks so that they can make creative decisions about when to give different inventory to different ad networks, or hitting in exchange -- at real time bidded exchange to get demand in coming from the exchange.

And so, as a publisher, we went through the same process and realized that any publisher that grow to a certain size is going to need a platform. MoPub had the largest that we could see platform for mobile monetization. It’s primarily focused on in-app ads. It started with the display ads. So chances are many of you have phones either on your pocket or in your hands. You probably opened up a couple of apps this afternoon or morning. Chances are we actually served you an ad without you even knowing that it came from MoPub. So it comes from the -- it looks like it’s in the publisher UI, it’s an ad from that publisher and then MoPub is placing that ad there.

About -- as I mentioned before, the reach and scale there is a billion iOS and Android users and the platform has tremendous volume. So over a 130 billion ad impressions just the last 30 days alone, and we think there is a huge opportunity we're bringing together with Twitter. Now we're working on pulling the technology pieces together so that for a marketer it’s pretty seamless. You come to Twitter; you run both on Twitter and off Twitter, at the same time. We're starting that in the app install business. There's a handful of customer that we're trying that with today. They are seeing really good performance and so ultimately as we get through the test, we'll begin to scale it up from there. And I think just financially, as Adam said, we think in-apps native, it’s sitting at the right intersection. So we think there is meaningful opportunity there, still early. But as you think about on the financials, we’re actually recognizing that. So you have to think about it that way. So it will be after we share some of the revenue blocks.

Adam Bain

You can see some of the agencies, this is mobile exchange rater, a mobile programmatic is an area that’s going to expand in the industry. You can see that the rest of the market beginning to take notice, take attention. We just announced to deal with Omnicom, the third of such holding company top style deals that we have done, and part of that announcement was focused on helping Omnicom take advantage of mobile programmatic through mobile.

Justin Post - Bank of America Merrill Lynch

All right. We’re initiating, we’re going through my Twitter feed and I couldn’t find any ads. And I know we’ve been after you; where your ad loads are today and where they could be, but you want to just update us on your thinking around ad loads and what you provide?

Adam Bain

Yes, absolutely. We look at ad load today and even back then and today we see the same thing. We feel like our ad loads are low, very low actually, on an absolute basis and also relative to others in our broader market. When we think about loads, by the way to your sample size of one ad load is should we kind of user targeted base and user behavior base. I think you follow business whether or not we have relevant ads to show. But if you look at it again, broadly, you would see that the ad load across the platform is very low.

As we think about ad load, we look at user experience first and foremost and we think about how we can bring in ads that are relevant. The vast majority of our ad revenue comes from pay-per-performance. We only get paid when the user engages with that ad. So the incentives are aligned for us to serve a relevant ad, for the advertiser to put forward high quality ads and then for us obviously show that right ad to the user at the right time. So over time we do think ad load will go up as we have that high-quality demand and we do have the relevant ads to show. But we have meaningful runway ahead of us on ad load.

Justin Post - Bank of America Merrill Lynch

Any more questions. I think we have one right here.

Unidentified Analyst

Just on top of the TV users I guess, given that you have the size and content targeting (indiscernible), it seems that you could make a good case to advertise in that, even if there is no engagement, you are getting a good -- a better interaction versus just other display. Is there a fundamental reason you guys know if you would move to a TPM product, and maybe video might be something like that.

Adam Bain

Yes. So at a high level we feel like, it aligns incentives around the table. And here is what I mean. When you charge on engagements that are on view, it means ultimately the marketer and the agency have to provide good content into the platform. It means that Twitter has to provide good targeting ultimately and then for a consumer it provides a safe haven for them to essentially engage and connect with marketing and marketing messages on the platform.

What we've seen is that the engagement on the platform of consumers into ads and Internet marketing messages, and end marketers is higher on engagement rate than anything else on display. In display you’ve got a point zero whatever; and in platforms like this, they are orders of magnitude or higher. That said, on the measurement side we do show the marketer, when you run a campaign with us, what the impact of exposure, what the impact of engagement, what the impact of re-tweet, what the impact of follower is. And that attribute mode is pretty wide and pretty thick. And it’s a great storyline to the marketers.

We’re with a CPG marketer, for example. We can show in-store sales action. Ultimately return on ads has been lift for any of these words that I just talked about. And so that’s something we’re going to continue to do. Certainly in the video side, there’s a bunch of different models that work out there with video beyond just a CPM or a view based model. There's things where it’s more engagement focused. And I think that’s -- we like the idea that it keeps everybody around the table, honestly, including ourselves to provide the very best experience back down to the consumer.

Justin Post - Bank of America Merrill Lynch

Last question from me. You mentioned data tons of times and trying to think about cross cost technology, not just my sector, but tremendous amount of data available on Twitter. How far along are you in scratching the surface and understanding that data and utilizing it and taking advantage of it at this point?

Mike Gupta.

Maybe I can start. Look, I think there is a tremendous amount of data. We think there’s a tremendous amount of value there as evidenced by the Gnip acquisition and just generally, and I think when we look at the usage, I would say it’s generally speaking always early. There is more we can do, on the advertisement side. And Adam can talk on this, but there is a lot of data that goes into the targeting capabilities that we provide advertisers in the different ways we can take those user interactions to really understand and target. So we think it’s hugely valuable for advisers.

On the consumer side, that data is also helping us inform some of the things we talked about earlier, meaning when and what type of content to show a user, be it organized content, be in the form of Push Notifications and things like that. So I would say generally it’s early. We’re doing a lot today. We think the Gnip acquisition accelerates that and also allows us to share that more broadly with folks who want to access our data.

Adam Bain

Yes, I think on the platform side, what’s unique on the data side is as you bring Twitter engagement data into how they've been looking at the world, that’s really what the TV ratings part that we’ve been going market by market and doing is really showing that and that rating by the way came from the market placing that they want an added view into television watching or television engagement beyond just GRP and TRP. You see it through the Billboard announcement that we did in the music space where category by category, we think that there's interesting views and perspective. Actually the marketers and agencies do as well.

When you look at it through that lens in through Gnip and some of the data initiatives that we do, you see people on the financial services communities still hedge funds for example or others that take the corpus of Twitter data and actually are using the time predictions around ultimately where the market is going to move or different micro-markets are going to move. So it’s really interesting set. You can see even in the health space, there was a study done at John Hopkins where they were able to trace the flu behavior throughout the U.S. just by watching for people that were tweeting about being sick, having the flu, not being able to get out of the bed. And certainly on the mobile side, if you’re sick you’re not going to get out of bed and go to a PC and say I'm feeling sick. Chances are you grab the phone right there on night table and will tweet it out.

And so I think on the platform side, there is huge opportunities to change how we look at each of the industries through this other lens around Twitter data. And then on the marketer side and the internal Twitter targeting side, I think we're just getting started. As I mentioned, we’re 3.5 years into building out the business. The first part of that really was going out and just talking the people to figure out what we should even build and our view is that we’re just getting started on the monetization side and there is a lot of really great work left to come from us.

Justin Post - Bank of America Merrill Lynch

Right, thanks Adam. Thanks Mike. Really appreciate you guys. Thank you.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!