Twitter Management Discusses Q4 2013 Results - Earnings Call Transcript

Twitter (TWTR) Q4 2013 Earnings Call February 5, 2014 5:01 PM ET

Executives

Krista Bessinger

Richard Costolo - Chief Executive Officer and Director

Mike Gupta - Chief Financial Officer

Analysts

Heath P. Terry - Goldman Sachs Group Inc., Research Division

Ross Sandler - Deutsche Bank AG, Research Division

Douglas Anmuth - JP Morgan Chase & Co, Research Division

Mark S. Mahaney - RBC Capital Markets, LLC, Research Division

A. Justin Post - BofA Merrill Lynch, Research Division

Carlos Kirjner - Sanford C. Bernstein & Co., LLC., Research Division

Eric James Sheridan - UBS Investment Bank, Research Division

Benjamin A. Schachter - Macquarie Research

Operator

Good day, ladies and gentlemen, and welcome to the Twitter Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Krista Bessinger, Senior Director of Investor Relations. Ma'am, you may begin.

Krista Bessinger

Great. Thank you, Sam, and good afternoon. Welcome to all of you who are joining us either by phone, via webcast or via Twitter. On behalf of the entire management team, I would like to thank you for joining us on our first earnings call.

We have with us today our Chief Executive Officer, Dick Costolo; and Chief Financial Officer, Mike Gupta. Before we begin, please note that we'll start with approximately 30 minutes of prepared remarks, followed by 30 minutes of Q&A.

During the Q&A, we will take questions submitted via Twitter in addition to questions submitted by conference call participants. Questions submitted via Twitter should be directed to @TwitterIR, using the hashtag #TWTRearnings.

Please also note that during the course of today's call, we will make forward-looking statements which generally relate to future events or our future financial or operating performance. These include our outlook for Q1 and 2014 and our operational plans and strategy. Actual results may differ materially from those contemplated in our forward-looking statements, and reported results should not be considered as an indication of future performance. A discussion of risks and uncertainties related to our business is contained in our filings with the Securities and Exchange Commission, and we refer you to these filings.

The forward-looking statements on this call are based on information available to us as of today's date, and we disclaim any obligation to update any forward-looking statements except as required by law. Also, I'd like to remind you that during the course of this call, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measure are provided in the tables on our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results.

This conference call is being webcast through our Investor Relations website and through Twitter. An audio replay of this call will also be available via Twitter and on our website in a few hours. And finally, please note that Twitter have used and intends to continue to use its Investor Relations website, investor.twitterinc.com, as well as certain Twitter accounts, including @dickc, @Twitter and @TwitterIR as a means of disclosing material non-public information and for complying with disclosure obligations under Regulation FD.

And with that, I would like to turn the call over to Twitter's Chief Executive Officer, Dick Costolo.

Richard Costolo

Thanks, Krista. Good afternoon, everyone, and welcome to our fourth quarter and full year 2013 earnings call. Since this is our first call as a public company, I want to give you an overview here of how this will go today.

For the benefit of those who didn't see our IPO roadshow, I'll start with a quick overview of what Twitter is and what makes us unique. I'll then speak quickly to the company's fourth quarter performance and our top priorities for 2014 before turning it over to our CFO, Mike Gupta, who will go a bit deeper on our quarterly performance and outlook. Then once Mike is done, I'll end with a few closing comments on how we're viewing the market, how we're thinking about the long-term opportunity, and then we'll open the lines for your questions.

Okay. Twitter is the only platform that is simultaneously public, real-time, conversational and widely distributed. No other platform combines all these elements at scale. Anyone can create a tweet, and tweets can be read by anyone, and this has created a level playing field, essentially democratizing content creation and distribution.

As a result, Twitter enables a single voice to echo around the world instantly and unfiltered. As a case in point, we saw some powerful user moments in Q4, whether it was the more than 5.4 million tweets shared on the news of Nelson Mandela's passing in December, the 1.7 million tweets sent in just a couple hours as soccer fans around the globe anxiously awaited the fate of their country's team in the World Cup draw. Hundreds of millions of users continue to flock to Twitter every month to experience moments in their lives and moments in the world. When events happen, the event itself and the conversation surrounding the event unfold on Twitter.

A great TV example is NBC's show, The Voice, one of the most-watched programs on television. During an episode in November, The Voice gave fans a 5-minute window in the live show to save their favorite contestant by tweeting that performer's name with the hashtag #VoiceSave. The show's celebrity coaches also joined in, tweeting their followers to rally support for their favorite contestants. And hundreds of thousands of tweets later, Kat Robichaud, a young woman from Raleigh, North Carolina, was the first reality competition contestant saved by a Twitter vote.

It's moments like these, coupled with a strong holiday shopping season, that helped drive great Q4 results for us. Total revenue reached $243 million, up 116% year-over-year. Ad revenue reached $220 million, up 121% year-over-year; and non-GAAP adjusted EBITDA margins reached 18%. Mike will get into a lot more detail on these results in a few minutes.

First, I want to talk about our user growth. We are confident in our ability to continue to scale revenue by expanding our global reach and introducing and scaling new ad products even as we continue to maintain some of the industry's strictest limits on ad load in order to optimize for the user experience.

With confidence in our ability to scale revenue, we are doubling down in 2014 to accelerate the growth of our core user base. Let me talk to you for a bit about how we started down that path in Q4, and then I'll talk about 2014 more broadly.

By bringing the content of Twitter forward and pushing the scaffolding of the language of Twitter to the background, we can increase high-quality interactions and make it more likely that new or casual users will find this service as indispensable as our existing core users do. And we took initial steps in that direction with the introduction of media forward timelines and in-line social actions in October, and we're already starting to see early signs that those initiatives are working well.

For example, user interaction in the form of favorites and retweets is up more than 35% since launching these features in Q4.

Other recent changes like putting direct messaging front and center in our native mobile apps on iOS and Android are also driving increased interaction, with messaging up more than 25% just since that change. Search has also become one of our fastest-growing features, with a 120% increase in total searches year-over-year.

Outside of the core product experience, we're also rolling out a number of improvements that we expect will have a positive impact on user growth and retention over time. These include much simpler user onboarding experiences with native mobile sign-ups, along with other methods of reengaging inactive users. It's important to realize, however, that it will be a combination of changes introduced over the course of the year that we believe will start to change the slope of the growth curve.

Furthermore, I want to point out that some product changes we could make could result in short-term fluctuations in some of our operational metrics, particularly timeline views. As a quick reminder, timeline views are kind of a proxy for the amount of content our users consume. They were impacted in Q4 by a series of product improvements across both iOS and Android that were designed to increase interaction per timeline view. Those product changes worked extremely well, driving total interactions and interaction per timeline view up significantly.

We are essentially increasing the value of each timeline view as users are interacting with their timeline views at a much higher rate than ever before. And the more people interact with each other and the content on Twitter, the better it is for our users, our partners, advertisers and for the company, obviously.

Threaded conversations are another great example of this. Threaded conversations make it much easier to follow a conversation on Twitter but also cut down on timeline views, because users no longer need to scroll back and forth to find and interact with related replies. We believe that this new conversation approach offers a better experience for existing users and, more importantly, helps new users more quickly grasp the conversational nature of the platform.

We see significant room also for monetization growth in 2014. We're rolling out and scaling new ad products with great success. In Q4, we saw strong adoption of our self-serve product in the U.S. We launched a number of important targeting capabilities to better serve both brand and direct response advertisers who can now create tailored audiences, track online conversions and directly target TV conversations happening on Twitter.

We also began the international expansion of our self-serve ad platform with launches in the U.K., Canada and Ireland. These initiatives are just beginning but are already off to a great start, and we have many more important launches coming in 2014 as we continue to expand our platform and offerings again for users, partners and advertisers.

I'm also proud of the progress the team has made here in increasing the quality and pace of our product launches. We made a considerable effort in 2013 to develop a more robust mobile experimentation framework, which is helping us significantly increase our product launch cadence. We developed this infrastructure to help us iterate and test new ideas much more quickly, and we're seeing the benefit both in terms of the quality and quantity of product launches.

One of our core values as a company is to reach every person on the planet. And in 2014, we're focused on building a Twitter that is truly accessible and valuable to everyone. We launched a few things that really started to get that flywheel of increased user interaction going in Q4, and I'm delighted with the early results.

Importantly, these results give us confidence in our other hypotheses about the product. Let me outline just a few of those initiatives that are on the 2014 roadmap for you.

One, we're making significant improvements in the new user experience, as I referenced, particularly on mobile. Every day we see more new user sign-ups on mobile devices, which gives us an enormous opportunity to connect new users immediately to friends and contacts already on our platform.

We know that tight mutual connections drive higher interaction from day one and significantly increase engagement over time.

Two, we believe that the integration of richer media experiences will help make Twitter more accessible to a broader audience. We've already taken steps in that direction with the simple launch of media forward timelines in the fourth quarter, and I couldn't be more pleased with those results. We will continue to invest to make Twitter a more visually engaging medium across a number of dimensions, the launch of media forward in Q4 just being the beginning.

Three, we will continue to invest to make Twitter a better tool for conversation, both public and private. The conversational use case is a daily habit already for many of our users, and we believe that by building features that enhance conversations and messaging, we will help attract more users to the platform and deepen the engagement of those we already have.

Last but not least, fourth, we want to do a better job organizing content for our users along topical lines rather than just chronological lines. We believe that topic-based discovery on our platform will make Twitter easier to understand and use for everyone.

We think there's a lot we can do to significantly improve the user experience over the course of the year in 2014, so you will see us launch much more in each of those areas, as well as other areas. We believe the changes we're making will create a much more satisfying experience for users in their first few days, weeks and then months and years on Twitter and ultimately lead to higher engagement and user growth over time.

And with that, I'll hand it over to Mike here to go deeper into our Q4 financial performance and outlook.

Mike Gupta

Thank you, Dick, and good afternoon, everyone. I will walk you through our financial and operating performance for Q4 and then touch briefly on our guidance before returning it back over to Dick for his closing remarks.

Given that this is our first earnings call, I thought it would be helpful to quickly review the drivers of our advertising business and how we measure each before turning to the Q4 results. As a reminder, the key drivers of our ad business are reach, engagement and monetization. We measure reach in terms of our active user base or monthly active users. We measure engagement by looking at timeline views per monthly active user, and we measure monetization in terms of ad revenue per 1,000 timeline views.

I will cover each in more detail in a few minutes, but first, our financials. We are very pleased with our Q4 financial results. In fact, it was our strongest quarter to date. As Dick mentioned, revenue in the fourth quarter reached $243 million, up 116% from the year-ago period and up 44% sequentially.

Ad revenue reached $220 million, up 121% from last year and up 43% from the third quarter, driven by strong ad revenue per timeline view. Ad revenue per 1,000 timeline views reached $1.49, up 76% from the prior year and up 54% quarter-over-quarter.

A number of factors contributed to the strong performance. First, we saw a significant increase in ad engagements, which are up more than 600% from the prior year and up more than 70% quarter-over-quarter. This was driven by a number of recent product innovations, including media forward, where photos and videos are represented front and center in your home timeline.

We also saw strong advertiser demand across all channels during the Q4 holiday shopping season, and we benefited from a number of prediction and ad-targeting improvements that we rolled out in 2013. Mobile also continued to be a strong driver in the fourth quarter, with more than 75% of total ad revenue being generated from mobile devices. This is up from more than 55% in the prior year.

Data licensing and other revenue contributed $23 million in the fourth quarter, an increase of 80% year-over-year. This includes $8 million of revenue recognized on a net basis from MoPub, which we acquired in late October. Without MoPub, data licensing and other revenue grew 20% year-over-year.

In Q4, international revenue represented 27% of total revenue, up approximately 200% year-over-year. And while we've made good progress building out our international sales and marketing teams, we are still in the early stages of expansion.

Let me now turn to ad engagements and cost per ad engagement, but first, some context. As a reminder, the vast majority of our advertising revenue comes from pay-for-performance products that are sold through an auction. Like comparable ad platforms, our auctions are based on maximizing the yield of each ad unit and not the cost per ad engagement. Our auction is ranked broadly on a combination of ad quality and cost per engagement. Higher-quality ads, more relevant ads, have a higher predicted engagement rate and, therefore, do not have to bid as high to win the auction, resulting in a lower cost per ad engagement. This form of auction helps us to ensure that our users see the most relevant and engaging ads.

In addition to providing a positive user experience around ads, we are very focused on improving advertiser ROI and making our platform more accessible to a broader range of advertisers. To that end, we are constantly making improvements to our ad products and our prediction and targeting capabilities.

Over time, these changes have resulted in higher-quality ads, a lower average cost per ad engagement and a higher number of total ad engagements. In Q4, average cost per ad engagement was down 18% quarter-over-quarter. This was more than offset by the 70%-plus increase in total ad engagements that I mentioned earlier, thereby improving our overall yield while maintaining the quality of our user experience and increasing advertiser ROI.

Ad load also affects user experience, of course, and we continue to be very conservative in the number of ads we show our users, both on an absolute basis and relative to others in the industry.

Turning now to expenses. I want to remind you that unless otherwise noted, my comments will focus on our non-GAAP financial measures, which excludes stock-based compensation, amortization of acquired intangibles and income tax effects related to acquisitions.

For the GAAP financial measures, as well as the reconciliation between the non-GAAP financial measures and the GAAP financial measures, please refer to our earnings release posted on our IR website.

In Q4, total expenses were $226 million, up 102% year-over-year and up 22% from the previous quarter. The increase was driven primarily by headcount and related overhead costs as we continued to invest in our workforce to scale our business and drive continued product innovation on our platform. We ended the year with approximately 2,700 employees.

Let me now provide you with a quick breakdown of operating expense by line item. Cost of sales for the fourth quarter were $63 million, R&D costs were $68 million. Sales and marketing costs were $72 million, and general and administrative costs were $23 million. This resulted in adjusted EBITDA for the fourth quarter of $45 million compared to $18 million in the prior year period, representing an EBITDA margin of 18% in Q4.

Non-GAAP net income was $10 million in the fourth quarter, up from a non-GAAP net loss of approximately $300,000 in the same period a year ago. Our GAAP net loss was $511 million, which includes $521 million of stock-based compensation expense. Of this total stock-based compensation, $406 million is related to restricted stock units granted to employees and, in accordance with GAAP, was previously unrecognized until the effective date of our IPO.

Before I turn to metrics, let me cover a few items related to cash and CapEx. We ended the year with roughly $2.2 billion of cash and marketable securities. Our Q4 CapEx was $89 million, $60 million of which was financed through capital leases, with the remaining $29 million purchased outright as property and equipment. Our total CapEx spend in Q4 reflects the continued investment in co-located data centers and office facilities.

Now I'd like to turn to our operating metrics. First, let's talk about reach. Our monthly active users for the fourth quarter were 241 million, up 30% from last year and up 4% from the third quarter. In terms of geographic breakdown, U.S. MAUs reached 54 million, up 21% from last year and up 3% sequentially. International MAUs were 187 million, up 33% from last year and up 4% sequentially.

Next is engagement or timeline views. Timeline views for the fourth quarter were approximately 148 billion, up 26% from last year but down 7% from the third quarter as we made a series of product changes across both iOS and Android designed to increase user interaction per timeline view.

Moving now to ad revenue per 1,000 timeline views. As I mentioned earlier, it reached $1.49 in Q4, up 76% year-over-year. This reflects U.S. ad revenue per 1,000 timeline views of $3.80 and international ad revenue per 1,000 timeline views of $0.60.

Before I turn to guidance, I want to quickly provide some context around the strong holiday season that we saw in Q4. Large brand advertisers drove a significant portion of our growth with particularly strong spend around Black Friday and Cyber Monday. We saw broad-based demand across a number of verticals, including consumer products, retail and financial services.

Advertisers are increasingly recognizing that conversions -- conversations on Twitter provide a valuable opportunity to connect with consumers in real-time. And in Q4, we saw a record number of retailers flock to Twitter to do just that.

Now let's turn to our outlook. While Q4 was a strong quarter for us, we believe part of it was driven by seasonal factors as advertisers typically spend more in Q4 due to the holiday shopping season and less in Q1 as they reset their budgets. Despite this seasonal trend, we expect total revenue in the range of $230 million to $240 million.

With regard to MoPub, we won't be giving explicit guidance, but note that as an ad exchange, we expect that MoPub will also be impacted by the same seasonal trends. In terms of data licensing, we expect that business to be roughly flat in Q1 and for the remainder of the year as we remain focused on growing our core advertising business.

Finally, moving on to profit and stock-based compensation expense for Q1, we expect adjusted EBITDA to be in the range of $10 million to $16 million and stock-based compensation expense to be in the range of $145 million to $155 million.

For full year 2014, we expect total revenues of between $1.15 billion and $1.2 billion, adjusted EBITDA of $150 million to $180 million and stock-based compensation expense in the range of $600 million to $650 million, with CapEx between $330 million to $390 million.

I will now turn the call back to Dick for a few closing remarks before we open the call to questions.

Richard Costolo

Thanks, Mike. In summary, we feel very well positioned for growth in 2014. We will reach many more people, and we'll build on our core value propositions for users, partners and advertisers.

For users, we will continue to make the product easier to use and introduce new capabilities that we believe will preserve the experience that core users love while making it easier for new users to understand the product and experience the unique content on our platform right away.

For partners, we'll continue to leverage our media relationships to drive more content distribution to our platform and for advertisers, we'll launch new ad products that provide even more powerful targeting capabilities, both for brand and direct response advertisers. And we'll launch new ad formats that we believe will increase demand for marketers and engagement from users.

We have only scratched the surface of what we believe Twitter can become. None of this progress, of course, would be possible without our amazing users, our talented employees, so I want to quickly thank all of them for a phenomenal 2013. We certainly wouldn't be here without them.

And with that, we'll open the line for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Heath Terry of Goldman Sachs.

Heath P. Terry - Goldman Sachs Group Inc., Research Division

Dick, you've touched on the fact that there were some factors that negatively impacted what would have been normal timeline growth due to the product enhancements. Was there anything like that, that would have impacted user growth in the quarter or made the growth rate in Q4 less comparable to the number that you guys printed for Q3? And then to the extent that you're talking about all of the things that should drive accelerating user growth in 2014, realize we're a month in, but any early indications that you're seeing in January of the impact from all of the product enhancements you've been making to drive user growth?

Richard Costolo

Yes. Great, Heath. Thanks very much. Let me take those together, I guess, and take a couple of minutes to really frame how we're thinking about this. I would say up until last year, our growth has been viral and organic. Growth was something that happened to us. And as I've mentioned, we've launched a few things in Q4 that really started to get that flywheel of increased user interaction going, and because we're so happy with those early results, again, favorites and retweets, up 35% just in the quarter; direct messages, up 25%, et cetera, because of that, that gives us confidence that the hypotheses we have based on our user research and our data, about the roadmap we've crafted, that gives us confidence that, that roadmap will be successful. Again, so if you think about that roadmap, let me dive a little bit deeper into that. Going back to that statement I made about Twitter being the only platform that is simultaneously public, real-time, conversational and widely distributed, we believe those 4 pillars are the right 4 pillars to help us reach every connected person on the planet. In other words, we don't think we need to change anything about the characteristics of our platform, we simply need to make Twitter a better Twitter. So let me talk about the things that we will do to enhance those 4 pillars and expand on what I already mentioned a bit. Again, we'll improve the new user experience, particularly on mobile. We have a number of initiatives underway to improve the onboarding process of new users and get them up to speed very quickly. The native mobile sign-up that we're launching that allows us to make onboarding much more seamless for people and quickly connect you with the people you know who are already on Twitter. Our user research tells us that this drives increased interaction from day one and significantly higher growth over time. Two, that integration of those richer media experiences helps make Twitter more accessible, I think, is the proper word, to a broader audience. We've already taken steps in that direction with that launch of media forward. We'll continue to invest to make Twitter a more visually engaging medium across a number of dimensions. That launch of media forward you should think of is just the very tip of the iceberg. Three, and I'll expand on one of the other points I made in my prepared remarks a little bit, we'll continue to make Twitter a better tool for conversations, both public and private. The conversational use case is a daily habit for many of our users. I talked frequently about Twitter being this global town square. And when you're walking through the town square and observing something, you often want to whisper to the person next to you about the thing you're both observing. So that notion of private messaging that we've brought forward and seeing it increased 25% in just one quarter is in service to enhancing that back and forth between the public and private conversation. We believe that by building features that enhance those conversations and messaging, we will help attract more users to the platform and deepen the engagement of those we already have. And finally, as I mentioned, we'll do a better job of organizing content for our users along topical lines and relevance lines rather than just chronological lines. We believe that topic-based discovery on the platform makes Twitter easier to understand and use for everyone. We've just started to focus on these changes. As I mentioned, this first set of interaction-facing launches we came out with in Q4 have seen great results. And again, those results give us confidence that the kinds of things we hypothesize about elsewhere in the product will be successful. So those additive changes over the course of the year that will be in service to making Twitter even more public, real-time, conversational, widely distributed, will start to change the slope of that growth curve going forward.

Operator

Our next question comes from Ross Sandler of Deutsche Bank.

Ross Sandler - Deutsche Bank AG, Research Division

Okay, guys. Just a couple of questions. I hate to kind of beat the dead horse, but, Dick, you guys have said that the #1 priority is driving MAU acceleration. And I guess, given the amount of attention that Twitter got in the fourth quarter around the IPO and just in general, and the fact that you guys have been testing a lot of these new features, did any of these new rollouts create MAU churn, or were you disappointed by the level of MAU growth that you saw in the quarter? And then the second question is just kind of high-level. Can you guys give us a rough breakdown on revenue coming in from the various advertiser buckets? So like what percentage is from Ad Age 100 versus kind of your middle market or your SMB channels?

Richard Costolo

Yes. Ross, thanks. This is Dick. I guess I'll frame that for you by going back to the way I think about the infrastructure that we're building in service to delivering on the roadmap we're building towards. So for example, the benefit of having an infrastructure now that allows us to test many more things and experiments and ideas simultaneously and then analyze the results of those experiments more quickly across a number of dimensions, allows us to do things like build on a set of metrics like the interactions we were driving in Q4 in service to then making these additive changes to the new user experience and the kinds of content that we're going to be driving more of into the product around media and these different content discovery experiences around relevance-based timelines, topic-based timelines. I really think of it as the collection of these things that we want to do over the arc of the entire product throughout the course of the year that will deliver the change in the slope of the growth curve we want to see, not -- I think it's not the way we look at those experiment results as whether they have a direct line to MAU. We know from our user research the kinds of things that cause users to become more engaged and stick with the product and core and make it indispensable to them. So it's those things that we're looking to drive into the product. We're seeing the early results of those things like the things we launched in Q4, having the kinds of results we'd hope they have. So it's my hope and our belief and why we are confident in our hypotheses that those will continue to deliver the kind of results we expect, all in service to the user growth we all hope to see.

Mike Gupta

Ross, this is Mike. I'll take the second question. So we don't disclose the ad revenue by channel, but just to give you some context here, we saw strength across all channels in Q4. And as you know, we benefit from having started really at the top of the funnel with the large branded advertisers and the Ad Age 100, with virtually all of them being advertisers on our platform. We have a concerted effort to move down to the mid-market and the SMBs, and with -- some of the things we're doing around targeting and direct response. We're seeing nice uptake in the mid-market channel. And then with self-serve, as you know, we launched last year here in the U.S., and we've launched internationally now in countries like the U.K., Ireland and Canada. And while it's still early, we're seeing nice results there. So with some of the added targeting capabilities, things like Lead Gen Cards, et cetera, we're seeing nice uptake from the mid-market and the SMB. So that continues to grow.

Operator

Our next question comes from Doug Anmuth of JPMorgan.

Douglas Anmuth - JP Morgan Chase & Co, Research Division

I wanted to follow up on engagement but shift over a little bit and just talk about timeline views and hoping that you can help us sort of prioritize or weight the impacts that you saw on timeline views and just -- this is somewhat of a shift, I guess, from sort of quantity to really the quality of timeline views. How should we think about the growth of timeline views going forward and what you saw? Is it fully product-based and serve a function of your own changes? Or you think that there was something else going on? And I also just wanted to ask you about your thoughts on e-commerce on the platform going forward?

Richard Costolo

Sure. I guess the way I would answer that is to say that timeline views and timeline views per MAU are a measure of engagement. When we look at the experiments we're running and we look at the kinds of things we're trying to deliver into the product, it is absolutely the case that the volume of interactions per timeline view was something we were hoping to drive with the things that we -- capabilities we launched in Q4, and that was successful. And we're seeing that again in the kinds of metrics I talked to you about and the kinds of increased engagements you saw from Mike on the advertising front as well. I guess I'll hand it over to Mike to see if he's -- you've got anything you want to add there, vis-à-vis color on revenue and so forth.

Mike Gupta

Yes. So I think as it relates, Doug, to the timeline views, it is a relevant metric. We think of it a little more long term in nature. We will see fluctuations, especially as we're experimenting and looking at these products. And we do think the combination of all these things will drive the user growth, as well as higher engagement, if you will, or interactions with the timeline views. So we are looking at both. We do think delivering more value in those timelines to our users and having high-quality timelines is important. So that's part of the focus. But think of timeline views as long term. And then on e-commerce, Dick, do you want to take...

Richard Costolo

Yes, sure. So I think as is well known, we hired Nathan Hubbard, who was the CEO of Ticketmaster, to come in last year and explore commerce opportunities on Twitter. It's the case today that commerce really takes place all the time on Twitter, now, in-the-moment commerce that we see constantly across the platform. Some of those activities are activities that we've engaged in ourselves with other companies. American Express and Starbucks are 2 great examples of in-the-moment commerce that we've trialed on Twitter, and those have been extremely successful. But there are others that brands engage in every day on their own. So if you think about the commerce, the in-the-moment commerce opportunity and the way we've developed the Cards platform -- for those of you who are unfamiliar with Cards, it's our way of adding a rich canvas and additional kinds of action to Twitter in which the 140 characters really becomes a caption to this much richer card that carries with it interactivity and actions. That will be the vehicle through which we think about commerce opportunities. We don't have any current plans or timelines or -- to announce right now, but when we do, we'll come back to you certainly.

Krista Bessinger

And the next question we're going to take is from the Twitter stream that comes from the account of Colin Sebastian at RW Baird.

And he asks, how do you plan to balance monetization with improving the user experience and driving further user and timeline view growth?

Mike Gupta

Great. Thanks Krista and thanks Colin. I'll take that one. So I think we've talked about the user and timeline view growth, but let me take the first part of the question. We are very focused on the user experience and, in particular, as it relates to the ads that they experience on the platform. And when you look at what we've achieved from an ad revenue per timeline view growth, per 1,000 timeline views, that's up 54% sequentially and up over 75% year-over-year. So we've seen strong growth in ad revenue per 1,000 timeline views. And what's important to note, that was primarily or largely driven by an increase in ad engagements. And those -- that increase in ad engagements is coming from several things: one, it's the fact that we've improved our prediction and targeting capabilities; second, we have a strong broad base of advertiser demand as we continue to iterate on the ad platform. We've brought in a broader array of advertisers. This has all resulted in our ability to serve our users more relevant and higher-quality ads, and we see that translate in the increase in ad engagements. So in the quarter, there was a very modest increase in ad load. And I would remind you, that was also driven by the fact that we had increased demand in the strong Q4 shopping season here from our advertisers. And so the -- we're very cognizant of balancing it. We think, with the improvements we're making on the ad platform, we can do that. And as it relates to ad load and the ultimate user experience, we feel like we have a meaningful runway ahead of us, and we're low not only on an absolute basis but also relative to others in the industry.

Operator

Our next question comes from Scott Devitt of Morgan Stanley. [Technical Difficulty] Our next question comes from Mark Mahaney of RBC Capital Markets.

Mark S. Mahaney - RBC Capital Markets, LLC, Research Division

Mike, I think you talked about being very conservative in terms of ad load. Could you quantify a little bit how you think about your ad load versus what else is out there in the industry, say, Facebook's 5%, how we should think about where your ad load is versus there and versus where it could go in the future? And then any quick comments on the adoption of the Amplify product?

Mike Gupta

Sure. So let me take Amplify first. We feel good about that. The adoption, while early, has been really strong, and we see tremendous promise in that. We continue to build on it. We think it's a great extension of reach for the content providers, as well as advertisers. In Q4 alone, we signed a host of new partners, including Major League Baseball, the English Premier league, College Football, 60 Minutes and many others. So again, it's still early. It's a small business today, but it's growing nicely and we feel good about the prospects there. As it relates to ad load, we're not going to share a specific number. But I think if you were to just look at the ad load even as a user, you would see that it's very light. And as I said, light relative to others in the industry, and we believe very much even on an absolute basis. So we're very cognizant about that ad load. And as far as taking ad load up, as I mentioned, there was a modest increase in Q4. That was again largely driven by the fact that we had high-quality advertiser demand and, therefore, high-quality relevant ads to share with our users. So we look at that as a key component in how we would drive ad load going forward.

Operator

Our next question comes from Justin Post of Merrill Lynch.

A. Justin Post - BofA Merrill Lynch, Research Division

Appreciated the guidance for 2014, both revenues and EBITDA. Looks like about 14% margins at the midpoint, which are going to be up from 2013 by a few points. Just maybe, from a high level, how the company thinks about margin improvement and investing in growth versus delivering bottom line results?

Mike Gupta

It's Mike. Thanks for the question. Yes. Look, we see a large opportunity ahead of us. And as you've noted, we've continued -- we invested in 2013. We will continue to invest in 2014. And that investment, frankly, will be across the board. It will be on the infrastructure side to make sure our business scales as the number of users and the amount of rich media on the platform scales. We'll continue to invest on the sales side as we expand internationally, and we'll invest on the R&D and engineering side as we continue to build and innovate on the products, both on the ad platform, as well as the user platform. So we see a lot of opportunity. We will absolutely continue to invest in the near to medium term. And what I would say is I would refer you back to the long-term margin that we shared when we were on the roadshow and remind everyone that there's nothing structural about our business that we think prevents us from getting to those margins, nor getting to the margins that you see broadly across the industry.

Krista Bessinger

And the next question comes from the Twitter account of @SandHillInsight.

And Chuck Jones asks, what was the MoPub contribution for the December quarter? And was it all in advertising revenue?

Mike Gupta

Great. Thanks for the question, Chuck. So MoPub contribution was $8 million in Q4. That, just a reminder, was a net revenue number. So we recognize that on a net basis, and that shows up in our data licensing and other line. And just as another reminder, we believe MoPub, as a mobile ad exchange, will pay some of those same seasonal trends going into Q1.

Operator

Our next question comes from Carlos Kirjner of Bernstein.

Carlos Kirjner - Sanford C. Bernstein & Co., LLC., Research Division

I want to go back to the user growth. If you triple the number of domestic users you add in a quarter to 3 million, it would take you about 12 years to get to 200 million users. Do you think Twitter will get to 200 million U.S. domestic -- U.S. users with, say, 5 or 6 years? Or in other words, do you expect the improvements that you mentioned to have a much greater impact than tripling the number of quarterly user adds?

Richard Costolo

Yes. So this is Dick. Thanks, Carlos. Again, I'll go back to -- we have a very, very clear roadmap across a number of dimensions that we will use to drive interaction and engagement and make it easier for a broader audience to get Twitter, to understand Twitter more quickly because of the success we've seen in the first few things we did in service to that goal in Q4, very specifically around the hypotheses we had based on the user research we saw. Because of that success on that increase in interactions, we believe that the cumulative effect of the changes we make over the course of the year, along exactly the kinds of dimensions I talked about, will result in changing the slope of the growth curve. We have every confidence that, that will happen. What exactly the slope of that curve looks like and when it will occur is not something I can guess at. It will be the cumulative effect of those changes that we make to the product over the course of the year that we believe very confidently will have that impact. One of the reasons we've invested so heavily in those infrastructure changes, that allow us to experiment more quickly and more broadly, is precisely so that we can speed the impact of these kind of changes we want to make, this multiple set of changes that we want to make.

Carlos Kirjner - Sanford C. Bernstein & Co., LLC., Research Division

Just a quick follow-up, Dick. How many -- can you give us a sense as to how many people come on the platform, tried Twitter and then leave because they couldn't curate [ph] a good enough feed or for any other reason? Because that seems to be the problem that you're trying to address.

Richard Costolo

Yes. We're not going to speak specifically to the -- to any specific numbers of new user retention or so forth. What I will say, and I said this I think the morning of our IPO, is we have massive global awareness of Twitter, and we need to bridge that gap between awareness of Twitter and deep engagement on the platform. So it is absolutely the case that it is very much about making it easier for people who first come to the platform to get it more quickly. I mentioned in my prepared remarks, it's not just get it in the first weeks and months on Twitter, it's get it in the first moments, the first day on Twitter. So that is absolutely, absolutely a focus area for us.

Operator

Our next question comes from Eric Sheridan of UBS.

Eric James Sheridan - UBS Investment Bank, Research Division

Two, one on the advertising side. I wanted to understand a little bit more color on your conversations with advertisers as they think about Twitter as a platform from 2014 and beyond and what would bend the trajectory of dollars they're allocating to Twitter, whether it's user engagements or the type of ad products you're serving up to users and/or sort of attribution statistics you're able to provide back to advertisers to get them more comfortable with the platform generally. Second question, Dick, I think this one's for you. But other social media companies have seen the need to go outside of their main platform or mobile application to add capability in separate apps to drive broader adoption of their larger ad ecosystem and I wanted to know how much of what you want to accomplish at Twitter can be done inside the Twitter mobile app, or you might need to launch additional apps that might address more narrow niches of functionality.

Richard Costolo

Sure. So I think what we'll do is let me have Mike tackle the first couple there, and then I'll jump back in on your third question.

Mike Gupta

Great. So as it relates to conversations with advertisers, over the last 18 months, 2 years, it's gone very much from, "Why advertise on Twitter," to, "How do I advertise on Twitter, and how do I do that effectively?" And so we continue to see advertisers come to the platform and, frankly, get better at leveraging the power of the native ad unit. And those conversations, as they continue, we see that they like the ROI that they're seeing. They like what they're seeing as far as Twitter being a companion to life in the moment and these large events that we're all aware of. And so those are very positive conversations. What we see also by way of ROI and how they think about Twitter more and more as we develop more products and improve the targeting capabilities, we're giving them better and improved tools to see that ROI, and they're also seeing those results. So as an example, when you look for more of the direct response-oriented advertisers, we launched our Lead Gen Card in beta early last year and then full launched late last year. The uptake from those advertisers has been great. We've now launched conversion tracking for them. We have things like app downloads. So all of these things really allow those types of advertisers to get a clear line of sight to their ROIs. For the large branded folks, Twitter in TV is very much a part of the conversation. You asked about some of the studies and things like that. Millward Brown, a division of WPP, had conducted a study, and TV ad recall was up. I believe it's roughly 14% or so for folks who are using Twitter. The Nielsen study from late last year, folks who engaged with promoted tweets, brand favorability was 30% higher; purchase intent was 50% higher. So we're seeing a lot of those closed loop studies that point to the attribution, and those are being well received. And as far as budgets moving beyond experimentation, obviously, it's hard to generalize because we have advertisers in different points in that cycle. But in general, yes, we are seeing advertisers on the platform continuing to improve spend. So if we're going to look at a subsection like the Ad Age on average, that's going up year-over-year, and so we feel good about that. Let me turn over to Dick for the second question.

Richard Costolo

Okay. Let me maybe give you a framework through which -- or the lens rather -- the lens through which I think about this one app, multiple apps question, and then that will drive me toward my ultimate answer. The question that I think of that's relevant here is do we have a platform that's differentiated? And does it remain differentiated over the long term? And we believe that we do. We live in a world where we know there are going to be multiple social services. It's not the case that one app or one use case wins over the other. Each one carves out a use case and tries to do that job better than anyone else. Twitter, we think of, is the best product in the world for real-time, in-the-moment interaction, conversation and discovery. That's driven by a number of unique characteristics we have, including the fact that we have a short form format that drives fast consumption. And then that's how users see us, as the place to go for real-time in-the-moment conversation and discovery. So we do believe we have significant differentiation. We're a really unique product, and the uniqueness of the product derives from what I said before, meaning we're the only platform that's public, real-time, conversational and distributed. What that means in a practical sense is that we're the place that information breaks first. We're the place that real-time discovery of content happens. We're the place that exists as the consummate second screen, both the TV and for any experience that's happening in the world, and no other service can say that. So given that perspective, I don't have any particular religion about whether that means we need to land at one end of the continuum or other on specific use case apps or not. I absolutely think it could be the case that there are capabilities we want to integrate into the core service that we think could be better if they had an accompanying single-use app to go alongside them. But I don't have a perspective that we need to push ourselves in one direction or the other on the continuum in service to having a platform that's differentiated over the long term.

Operator

Our next question comes from Ben Schachter of Macquarie.

Benjamin A. Schachter - Macquarie Research

Dick, for many years, I think display advertising online has arguably failed to live up to expectations while search arguably performed better. However, it seems that over the past year or so, platforms like Facebook and Twitter have really shown that display targeting can be much more effective than traditional online. So my question is, one, do you agree with that? And two, what are the specific changes and innovations that are happening so recently that are enabling Twitter and others to be so much more effective than the traditional banners and other formats? And then second question, separately, just can you comment on the potential for video engagement on the Twitter platform? Meaning, instead of sending users off-platform, actually keeping them on Twitter while they watch video and video ads?

Richard Costolo

Yes. I mean, I'll answer the second question first because it's faster. I think there's an enormous opportunity there, and we will continue to innovate in that area. That's absolutely a place you will continue to see us invest in and make progress on. In regards to your first question, I really think it's because in the mobile world, that display ad can no longer be -- because frankly of the real estate, that display ad can no longer be an interruption through which a marketer tries to communicate more loudly than the content on the screen. It has to be that -- that advertisement has to be content that's relevant for the user. It has to be. And so that has made it the case that marketers have begun to understand more and more that when they communicate in the context of what's already happening for that user, and we see that all the time on our platform, marketers understanding how to engage in the moment and some of the most successful marketing campaigns on Twitter being those in-the-moment communications in the context of what's already happening, I think that's frankly that constraint, that real estate constraint, that has led us to the native mobile ad unit, where the ad is content first. You can reply, favorite, retweet a promoted tweet just like you can any other tweet, has led us down this path where the ads perform better when they're content first. And I think the other kinds of implications that we see as a result of that only enhance that benefit. So as a follow-on example of that, having marketers understand that the beauty of the one-to-one marketing that had for many, many years, I think, been sort of a mythological creature, this notion of one-to-one marketing, now on a platform, on a social platform where you can engage as a brand in one-to-one marketing with a customer and then have that direct engagement be amplified by the customer, him or herself and by the followers of that customer, enables these kinds of things that marketers had always talked about but had never really benefited from its high value. Previously, a one-to-one marketing engagement was just that. You got the benefit from the one person you engaged with. You now get these -- this ROI from that one-to-one marketing, and I think that, that combination of the native ad unit and true one-to-one marketing that's amplified has made a -- it just makes the ads better in this environment.

Krista Bessinger

And we have time now just for one last question, and that question comes from the Twitter stream from the account of Arvind Bhatia.

And his question is how dependent is 2014 guidance on improvement in user engagement versus ad load, ad engagement and ad pricing?

Mike Gupta

Great. Arvind, thanks for the question. So as we look at 2014 guidance, from a user perspective, we are not assuming any significant inflection point in the user growth curve. From an engagement perspective, it's more about ad revenue per 1,000 timeline views, and it's really a combination of ad engagement and, to a certain extent, ad pricing. And really, where I'd focus it is on as we improve the ad products and improve our targeting and prediction capabilities, we think that will bring more relevant and higher-quality ads to our users, as well the fact that we're seeing a broader array of advertisers come to the platform. So we think the combination of those will drive higher-quality ads, which, in turn, will drive higher ad engagement and, as we talked about in the prepared remarks, may have CPE, or cost per ad engagement, going down. But we really think it's the improvement on the ad revenue per timeline view side that will drive the guidance that we're talking about.

Richard Costolo

Okay. I want to thank all of you for joining us on today's call. And again, let me thank our users and our amazing employees for a great 2013, and we'll talk to you all again in a few months. Mom, if you're on the call, I'll promise to call sooner than that.

Krista Bessinger

Great. Thank you all for joining us. We appreciate your time and look forward to speaking with you again next quarter. Thank you.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a wonderful day.