The Good and Bad In Twitter’s Ad Business

Twitter’s active user growth in the fourth quarter of last year was disappointing to people inside the company, according to one person briefed on the figures. That suggests next week’s earnings aren’t likely to change gloomy investor attitudes toward the company.

But Twitter’s advertising business isn’t a monolith. Brand-ads sales have shown resiliency, including in the fourth quarter, while direct-response ads have not, the person says. That gives reason for optimism, as brand ads accounts for more than two thirds of Twitter’s ad revenue. More broadly, there is already plenty of direct response ad dollars flowing to rivals like Facebook, but drawing brand advertisers away from television is a big source of potential growth for digital media.

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There doesn’t seem to be much optimism in the Twitter ads team regarding Moments, a section of content that Twitter launched in October within its main app. It is nearly identical to Snapchat’s Stories feature, with Twitter paying workers to “curate” Moments—which are a series of Tweets and video that describe high-profile events such as a pro-football game or concert. The person familiar with Twitter’s ad business said even though it was recently launched, Moments is viewed by some at the company as a “failed product.”

—Tom Dotan contributed to this article.

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Twitter ran out of users to target and essentially hit the maximum “ad load” its executives were comfortable with.