推特 (TWTR) 2016 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Twitter third-quarter 2016 earnings conference call.

(Operator Instructions)

I would now like to turn the call over to your host, Krista Bessinger, Senior Director of Investor Relations. Please go ahead.

Good morning, everyone, and thanks for joining our Q3 earnings conference call. We have with us today our CEO, Jack Dorsey; the COO, Adam Bain; and CFO, Anthony Noto. We hope you've had a chance to read our shareholder letter published on our Investor Relations website a little while ago.

Like last quarter, we'll begin with just a few prepared remarks before opening the call directly to your questions. During the Q&A we'll take questions asked via Twitter, in addition to questions from conference call participants. Questions submitted via Twitter should be directed to @TwitterIR using #TWTR.

We would also like to remind everyone that we will be making forward-looking statements on this call, such as our outlook for Q4 and the full year 2016, and our operational plans and strategies. Actual results could differ materially from those contemplated by our forward-looking statements, and recorded results should not be considered as an indication of future performance.

Please take a look at our filings with the SEC for a discussion of the factors that could cause our results to differ materially. 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 during this call, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are included in our shareholder letter. These non-GAAP measures are not intended to be a substitute for our GAAP results.

Finally, this call in its entirety is being webcast from our Investor Relations website. An audio replay of this call will also be available via Twitter and on our website in a few hours. With that, I would like to turn it over to Jack.

Thanks, Krista. Hi everyone, and thank you for joining us. Before I talk about our results and strategy, I want to address the recent market speculation quickly by saying that our Board is committed to maximizing long-term shareholder value. I don't plan to comment any further on this topic.

We're seeing accelerating growth in our audience and [geatrum] metrics, and we set a goal of driving towards GAAP profitability in 2017. Last year we set out to do three things: Increase our discipline, simplify our service, and explain what Twitter is, and why people should use it.

This strategy is working. We hit an inflection point in Q2, and the positive trends are continuing. Product changes are driving an acceleration in year-over-year growth for daily active usage, Tweet impressions, and time spent for the second consecutive quarter.

We're shifting rapidly, and see a significant opportunity to increase growth as we continue to refine the core service. We're also taking important steps to make Twitter safer for everyone, with updates to share in the coming weeks.

Our live strategy is off to a great start. We launched a high-quality experience, and our live events are delivering strong audience and engagement results. We've received very positive feedback from people using the service, advertisers, and partners.

We're getting more disciplined about how we invest in the business. We're fully funded our most critical initiatives. We set a goal of driving towards GAAP profitability in 2017 as we de-prioritize certain initiatives, and simplify how we operate.

As part of this, we decided to reduce the size of our organization by 9%, mostly concentrated in sales, partnerships, and marketing. In conclusion, as our results show, our strategy is working.

We're seeing accelerating growth in our key audience and engagement metrics, and we're taking the necessary steps to ensure Twitter is well-positioned for long-term growth as we go towards GAAP profitability in 2017. With that, let me hand it back over to Krista for questions.

Great. Operator, we're ready to go ahead and poll for questions.

Thank you.

(Operator Instructions)

Okay, great. It looks like our first question comes from Ross Sandler at Deutsche Bank. Ross, can you please go ahead?

Sure. Thanks guys. Jack, in the letter you mentioned that live video is driving solid engagement with light Twitter users. Can you talk about the strategy there? Is the goal to bring on more premium content like the NFL or Bloomberg TV, or balance that with UGC. What is the conversion rate of these new folks who are getting the live video experience to regular Twitter users look like?

Then the second question, I guess for Anthony or for Adam, the owned and operated revenue growth was up 9%. I think you guys said in the letter you're reducing the ad load again in the quarter. You're also seeing DAUs accelerate.

If we look at 2017, is this the year where we'll start to see a re-acceleration in owned and operated? Is 4Q likely to be the trough quarter for that line? Any color there would be great. Thanks, guys.

Ross, thanks for the question. I'll just let you know, we're having a little bit of a hard time with some technical difficulties, hearing the full part of the -- your full question. I think we understood the first part about NFL, so we will go ahead and have Anthony answer that. In the meantime, we'll try to fix the audio so that we can actually hear the latter part of your question, but we'll probably ask you to restate it.

Thanks, Ross, and good morning, everyone. Our live initiative is off to a very promising start. Our number one objective when we launched in September behind the NFL and then all of the great programming that followed that was quality. We couldn't be more pleased with the feedback on the live experience on Twitter.

Our team did a great job building a product that can scale to many millions of users in three short months. In addition to building the product for our Twitter platforms, we also built it for logged-out experience on a number of our partners, including web syndication partners Yahoo, AOL, Sports Illustrated, and SB Nation, in addition to connected TV partners Apple, Amazon, and Microsoft.

Another significant technical accomplishment was that we've developed and launched dynamic ad insertion. That's very important given the auction dynamics of our overall advertising market place, to be able to deliver specific targeted ads to individual people, as opposed to everyone getting the same ad. We've seen great response there, as well. All of that said, we're at the beginning of the beginning as it relates to our product enhancements, and we have a roadmap for easier discovery, more engagement, and more conversation.

As it relates to the NFL in particular, we're very pleased with not only the quality of the product, the feedback that we've gotten from our audience, but also the metrics that we achieved. At the highest level, we had forecasted a range of 1 million to 3 million reach, as measured by unique viewers for all five games. We're over 2 million for our first two games, and then over the high end of that range, over 3 million, for the last three games.

Additionally, as you reference, we're very pleased to see the improvement and engagement with our light users compared to medium and heavy, having longer durations than medium and heavy when engaged with the game. Additionally, we are able to really leverage our logged-out and syndication experience, with up to 15% of the audience being logged out.

I think it's important to note that the player, when it's syndicated or logged out, it ultimately has the same ads as our own player on our platform, and the same measurement. We're monetizing that audience, just as we are in our owned and operated platform.

Then the last thing, we've talked about the fact that these live conversations, live connections, and live commentary are already happening on Twitter. By bringing the video forward, we're enhancing them, and enhancing our ability to drive real-time distribution of the content, and broaden that distribution. On an engagement level for the NFL games, we are over 450 million Tweet impressions during the broadcast window, and that's up meaningfully from where we were without the video.

Importantly, our live strategy is not just about the NFL. It's about leveraging nationally and globally recognized content like the NFL and the live debates to build awareness of under-served content, and really deliver on the interests that people have on Twitter in small niche areas, but also areas that today they cannot get access to content.

On the back of the NFL, we did the debates live, which reached record GAUs. They also had a very young audience, with 70% of the audience less than 35 years old. We saw incredible reach, over 3 million on a number of the debates.

We now have launched our three Bloomberg market shows; politics and tech, as well. In addition to that, we've launched the college conferences, which is really the under-served content that we want to bring to the interest of the people on Twitter. This week we launched the Starters from the NBA, and we have a daily show called The Rally.

The strategy is coming together very nicely. The metrics are very positive. It's a great product for our advertisers, and we're at the beginning of the beginning, with a lot more to pull out for the rest of the year as it relates to the program.

Great. Thank you, Anthony. We're going to need to just pause for a second while we switch over to the secondary communications line. If everybody on the line could just hold for a minute, we'll be right back.

I think we're back on with the secondary line. Ross, could you please restate the second part of your question?

Yes, the second question. Does this sound better?

Yes. I think you're coming through clearly. Go ahead.

Your owned and operated revenue was up 9%. You're reducing your ad load while your DAUs are also decelerating. When we look at 2017, do we see stronger revenue (inaudible -- audio difficulty)?

Ross, I think the heart of your question is you're seeing an acceleration in daily active users, an acceleration in impressions growth, an acceleration in time spent. When will that translate into revenue growth, and how do we think about revenue growth in the future, in addition to the fact that the auction dynamics are improving with ad load being a down.

What I would say is we're not going to give an outlook for revenue growth for the fourth quarter, and we can come back to that later in the conference call, or for 2017. What I will say is we are very encouraged by the product changes driving the acceleration in the last two quarters in audience and engagement. We believe those product changes will continue to contribute to audience and engagement. They're not just one-time events.

When you see accelerating growth in audience and in inventory, typically you'll see an improvement in revenue, because that normally bodes well for ROI.

Now let me flip it over to Adam to talk about the benefits that we're seeing in audience and impressions growth, and how we go to market, and see that translate into faster revenue growth in the future.

Hi, Ross. As Anthony mentioned, marketers are looking for audience growth and audience engagement sustained over time. We've now had two quarters of that kind of growth, and it's accelerating. That should help us greatly in our conversation that we're having with marketers.

It's also really important to have great ad products, as well. We've put out some ad products into the market place that are working, in terms of some of the early response that we've seen from Madison Avenue. The video products in particular, both the live streaming strategy that we have has been performing extremely well. The package is still very fast, for example, in the NFL deal over the last quarter. We've had over a dozen high-tier brands who have stepped up into sponsorships of that package, and marketers are happy with the performance.

What's unique about that ad package or that ad offering, ultimately, is that it's a very valuable ad product. This is sound-on video ads in between high-quality content, and with completion rates now that are industry leading.

As we think about the path ahead for the live streaming strategy in Q4, we'll go out and bring our NBA, NHL, and financial content package out to the market place. That's content like Bloomberg and Cheddar. We're already seeing some of these packages begin to move in some of our early selling.

The other big ad product that we have started seeing some traction now in the market place is our OLV strategy to win online video budgets. As you recall, this OLV market place is about a $9 billion or $10 billion ad market, with most of the money coming from video-centric services like YouTube and the like. We've seen another good quarter of add product execution to win OLV budgets. We're excited about the next-quarter ads.

Thank you. We will take the next question form Heath Terry at Goldman Sachs.

Great, thanks. I was wondering if you could give us a sense about how you're thinking about user growth next year. Obviously this was a year that benefited from political, Olympics, the addition of live. I realize you still have a lot in front of you for 2016, but to the extent that you would have investors think about the impact that had on this year, and what it means for user growth next year, that would be helpful?

Sure. I think the first part of your question, Heath, is did the Olympics and election drive your acceleration and metrics, and what I would say is no. The Olympics were obviously on air for 17 days and were talked about on Twitter. But there is less than 100,000 DAU over that 17-day time period using a seven-day average that we could attribute to the Olympics, so it's pretty small.

As it relates to the election, obviously it generates a lot of conversation on Twitter. Politics and news generate conversations on Twitter every day. There's no noticeable impact that we've seen from the elections. I would note that we saw an acceleration in Q2 in our metrics, as well as Q3, where there's a lot less election activity.

I would note that in the third quarter we did benefit meaningfully on the particular days that we had the live debates and the integrated product of that curated timeline of the conversations and commentary that were happening around the debates on those days. We did have record DAUs on a couple of days, which was a great accomplishment. But the massive size of our DAUs, and the fact we average them over 90 days, we really need to have a debate every day on Twitter for it to meaningfully improve the metrics on a quarterly basis, and that's where we're headed.

We want to really leverage this national and globally recognized content and live to build awareness of under-served, so that we do have a dependable place to find live content. We're very encouraged by those events. But for them to have an impact over a 90-day period, our live strategy has to be more fully rolled out. We're in the way on the process of doing that. The product changes were the key drivers. The product changes to the core Twitter application were the key drivers for the growth in the acceleration of DAUs, as well as impressions and the time spent.

As we look forward, we'll give you perspectives as a report, but we're not going to be in the business of forecasting growth, other than to say we're encouraged by the product changes. We think they'll impact more than one quarter, given the fact they are changes that affect all of the users that are currently on the platform, and those that come every day.

Great. Thanks, Anthony.

Brian Wieser, Pivotal Research.

Thanks for taking the question. I was wondering, could you talk a little bit about churn metrics, and how that might have been trending during the quarter? Maybe separately, regarding advertising spend or spending per advertiser, I'm wondering if you could talk about some of the dynamics going on there? I know you provided some commentary around customers using DCM. I was certainly also wondering to what degree that customers who are using DCM might be having -- expressing different spending trends versus other customers? Thank you.

As it relates to our monthly active user growth, which is what we typically refer to when we talk about retention, et cetera, we've seen growth in monthly active users from both strong top-of-the-funnel contribution, as well as retention contributing. Both are contributing in the quarter.

From our perspective, we've talked about on the call in the past that we are seeing a mix shift from big large advertisers, branded advertisers, which have a lot higher spending per advertiser than SMB advertisers that have much smaller. As our mix shift has gone from that large advertisers to the smaller advertisers, there has been pressure on ARPU.

Within each individual channel there are different trends in that, but that's the overall trend as it relates to ARPU and your specific question. On a quarter-over-quarter basis, we did see an improvement despite that trend in ARPU.

Brian, I can take your DCM question. The DCM work is starting to take shape. As we mentioned in the letter, we're seeing a $75 million now annual run rate, ads that are being tracked and reported through DCM. In Q4, we've already moved to a public beta for all of the brand engagement objectives. We're going to continue our private beta for direct response customers and performance-based marketers who can use the desktop data as a proxy for all the mobile conversions. Obviously DCM is an important step for us, as we're helping marketers better understand how Twitter ads are impacting their own conversion rates, and also the net effect of cross-device conversions overall.

The other part of our DoubleClick deal is DBM, the buying part. As we mentioned in the letter, we've already started our alpha of DoubleClick bid manager the first few weeks in Q4. We have live campaigns from advertisers who are buying Twitter through DBM.

Okay, great. Any specifics you can offer in terms of growth in spending from those customers were are using (inaudible - background noise) versus those who are not?

It's really early days overall. We're encouraged by what we've seen so far in terms of the tracked spend, and which way that's headed. But again, it is still in a beta.

Okay, thank you very much.

Eric Sheridan, UBS.

Thanks for taking the questions, maybe two. For Anthony, the commentary in the letter about refocusing around certain initiatives, I wanted to know if we could get a little more granularity or color there about where investments might be going up, where you might be pulling back in certain areas around the business.

Also, the follow-up would be so we can get a little bit better sense of what that might mean for the cost structure of the business as you move out of 2016 into 2017? Thanks so much.

Sure. First, I think is really important for everyone to understand we are focused on driving towards GAAP profitability in 2017. We are cutting costs that are non-core to our key objectives of driving audience, engagement, and monetization growth. It's also I think critical to understand that we're fully funding our most important initiatives that are driving those metrics, and that are doing that today.

As it relates to the broader objective, once a company gets to our scale and growth, it's appropriate to drive long-term margins and GAAP profitability. We're very proud of the fact that we've already generated over $330 million of free cash flow in 2016. That's defined as operating cash flow less CapEx.

While that's an important milestone to achieve for investor appeal, we think GAAP profitability is also an important milestone to achieve for investor appeal. We're focused on increasing the value for our investors and future investors.

As it relates to what it means for the cost structure leaving 2017, first I would point out that the financial impact of restructuring in 2016 will be small. The bulk of the cost savings will be in 2017.

We've talked to you in the past about our long-term adjusted EBITDA margins as a percent of net revenue being 40% to 45%. We remain confident in that objective. I want to give you a quick snapshot of where we are today, and how that will change as we go into 2017.

In the most recent quarter, Q3 2016, our G&A expenses on a net revenue basis were 7.6% of net revenue. That's revenue ex-tax, 7.6%. Our target that we shared with you in the past is 7% to 9%. We're already at the low end of the G&A expenses, and quite favorably to our competitive peers, many of which have magnitudes greater in revenue.

On research and development, it's a core investment area of the Company. We expect that line to continue to grow with revenue. It's the engine of growth. Our engineering and product design team is critical to driving the product changes that are resulting in audience engagement and audience metrics increasing. That was 15.4% of revenue on an ex-tax basis, and our long-term target's 11% to 15%.

Any changes that you see in that line are going to be from non-core areas as we move forward, we'll keep funding the most important areas. Sales and marketing, as we mentioned in our letter, was the largest area impacted by the restructuring that we announced. That was 30.7% of revenue ex-tax. Our goal is to be 22% to 26%, and we have a path to get there on the back of these changes and other initiatives as we move over time.

Then last, cost of revenue was 29.6% of revenue ex-tax. Our goal is to be 19% to 23% there. We're aggressively pursuing and evaluating a host of different options, both in our owned and operated data centers, as well as partnerships with others. We've utilized third-party cloud computing. It's been very efficient for us. We'll continue to look at those options to have that line item improve, as well.

We have a framework that we've talked about in the past. Today we will make a meaningful change towards that, but the overall team's goal of driving towards GAAP probability in 2017 will bring it to fruition.

Thanks for the color, Anthony.

Thanks, and we will take the next question from Twitter. It comes from the account of Victor Anthony at Axiom Capital. He asks, which product improvements led to the positive impact on revenue growth, engagement, and monetization.

Thanks, Anthony. A lot of the improvements have been really focused in two areas -- one, notifications, and two, the home timeline. The home timeline is where people spend the majority of their time on Twitter. We made a change earlier in the year to make sure that we're not just sorting by recency, but also by relevance. We're showing the most important Tweets and the Tweets that you really need to see faster and higher up in your timeline.

The other aspect is notifications. We're getting more and more relevant about delivering our notifications. We're delivering people to an experience and to Tweets that are not dead-ends, but they can actually explore more of Twitter. Those two areas have benefited dramatically from applying a whole lot more machine learning to each.

The other two areas that we continue to apply machine learning to are on-boarding and also tweeting. We expect to continue to drive those accelerations in DAU and Tweet impressions and time spent, by focusing on those four areas, and applying more technology to the problem.

Anthony DiClemente, Nomura.

Thanks for taking my questions and good morning. Anthony, you gave us the metrics on NFL viewership. Can you qualify how much live video contributed in the quarter in terms of revenue please? Really trying to understand if your live video streaming events in Q4 is what's driving the big implied revenue decline in Q4 versus Q3? Then on DAUs, you gave us the growth rate, but can you give us the number of DAUs in the quarter? That would be great. Then any guidance on MAUs or DAUs for next quarter would also be great; even just directionally, will they be up?

Then for Jack, bigger picture, I just heard what you said about the incremental improvements. What is the product road map from here going forward, other than live video? I just wonder, are there any plans for big revolutionary product changes? If it's really just live video and live streaming, I also wonder, the environment's more competitive for premium content. Won't you have to spend more on sports rights acquisition and premium video rights in order to keep this going? Thank you very much.

Thank you, Anthony. In terms of live revenue in the quarter, we launched -- we had two NFL games in the quarter in Q3. It's 20% of the overall package that we have. There was some revenue contribution, but it was small relative to the total revenue. We launched the rest of our schedule, programming schedule, on the back of that, with much more of that being launched and monetized in Q4.

I will tell you, and Adam alluded to previously, we are obviously very pleased with the response that we've had from advertisers on live advertising; but it also benefits everything else that we do in advertising, because it's part of the overall package that we're bringing to bear with advertisers. We do bundled packages with Amplify and other types of package sells.

In terms of the fourth-quarter revenue, we did not give revenue guidance. You referenced a guidance that was not reflective of what we said. I think it's important to understand we did give EBITDA guidance on a 2016 basis, as well as adjusted EBITDA margin.

The reason why we did not give a revenue forecast really ties back to the changes we announced today in our sales force. We're restructuring and moving from three channels to two channels. There will be transitions of accounts that will take place over the course of the quarter. Adam and the team think this is the right thing for the long-term business to drive both efficiency and its ability to scale effectively.

Sales force transitions can have unexpected impacts when you're transitioning accounts, which is what we've seen from other Internet companies. Given the transition of accounts, the revenue range for the fourth quarter is much wider than we would normally be looking at, so we're not going to give a specific narrow guidance range.

I would say that the trends we're seeing in audience acceleration as well as engagement acceleration and impressions in particular, generally bode well for better ROI, and for long-term future revenue growth. That's a one-quarter focus, which is why we're not providing guidance.

Your question on DAU, we'll evaluate our disclosure practices at the end of year, as we've done in the last two years. At the moment we're not going to give you specific DAU numbers. We are giving you the percent growth, as we do for ad engagements as well as CPE. We think that's very helpful, and incremental to what we've done in the past. Any more longer-term changes we'll announce in February when we announce fourth-quarter results and 2016 results, going into 2017.

Anthony, we are focused on building the most useful open and comprehensive news network on the planet. This is the fastest way to see what's happening. Our product is already revolutionary. We're focused on improving it every single day.

We've been making hundreds of small changes as quickly as we can that will continue to compound in more usage. The people are showing us that these changes are working. We're seeing more people wanting to use Twitter, and to use it more often.

We're focused on the most -- the areas of the product that people spend the majority of their time in, which is the home timeline; and notifications, making sure the home timeline becomes more and more relevant. You open up Twitter, and you see exactly what's happening. When you're out of the app, we're sending you notifications about what you may have missed, or what you need to see.

The more time we spend on on-boarding and making tweeting better, and enabling people to better capture what's happening, the better the service gets. We're certainly looking at every thing that we can do to improve our core and to strengthen our core, because we think it's unique, and we think it's powerful in the world.

We're also looking at new opportunities like live, because this is a pattern of usage that we've seen for 10 years on the platform. We've seen people watch TV with Twitter for 10 years and comment about it, which makes whatever they're watching a lot more interesting, a lot more entertaining, and a lot more insightful. We're looking at that, and trying to remove friction in every way that we can. That's what they live streaming initiative is about, and we'll continue to look for opportunities to remove more friction and deliver more value to the people using our service.

Anthony, because we get that question a lot, we want to really emphasize that we think there's a significant opportunity to drive daily usage growth and engagement growth through the Refine the Core initiative. In the letter, we quantified that there are millions of users that come every day to Twitter that are either signing up for new accounts, or reactivating an account. The opportunity to leverage those millions that come in the top of our funnel has been fairly consistent over the last year. We have that opportunity to convert them into daily active users.

I know many of you will likely look at that number and try to multiply it by 365 to figure what the absolute TAM is. Just for your benefit, we look at it not just on a daily basis in the top of the funnel, which is very large. Millions come every day. But we also look at it on a monthly basis, which we reported 317 million active unique accounts on a monthly basis. If you look at that same measurement on a quarterly basis, it's 420 million unique active accounts on a quarterly basis. If you look on it on an annual basis, it's 700 million unique active account on an annual basis.

The changes that we're making that are compounding on each other is applied against a very large opportunity every day, every month, every quarter, and annually. That's one of the most powerful things about Twitter is that opportunity presents itself every day, because we're pleased to see what's happening.

Okay, thanks.

Great, thank you. The next question comes from Michael Graham at Canaccord.

Hi, good morning. I just wanted to ask about the improving auction dynamics. Can you go into a little more detail about what's driving that? Then on the mix of brand versus performance advertisers in the quarter, did you -- do you see any changes there? I'm wondering if some of the M&A chatter had any impact on your conversations with brand advertisers, and might that bounce back now? Thanks.

Thanks, Michael. First in terms of the auction dynamics, we had Tweet impression growth, which is our available inventory for the Tweet ad product, not the live product. We saw Tweet impression growth accelerate, and it grew faster than revenue growth. For the first time in a very long time, our ad load went down sequentially.

Simultaneously, our click-through rate went up. It went up not just because of a shift to our video product, our auto-play video product, which has a very high engagement rate; it went up because of like-for-like ad product increases, which is very important. We had increases on like-for-like ad products in Q3 sequentially in every ad product except for one, and that was flat sequentially.

As we see the acceleration in DAU growth, as we see the acceleration in Tweet impressions for two consecutive quarters, it's bringing more valuable inventory onto the platform, and more scale for advertisers. There can be better targeting against that results and better click-through rates, better load factor, and better yields. Let me flip it over to Adam to talk about how we can leverage this in the marketplace to drive growth in the future that's faster than today.

Michael, as Anthony mentioned, we're encouraged by the accelerating growth that we're seeing. Certainly marketers now will be aware, and be paying attention to this growth.

Video for the second consecutive quarter now is our largest ad product by revenue, and it's also our fastest growing. We've seen two big trends in our marketplace. One is that our current advertiser set is upgrading into these video ads. The second opportunity that we see clear ahead of us are these new incremental budgets, these OLV budgets that we've talked about.

We had a great quarter in terms of product execution for our OLV strategy. We've launched now a reach in frequency planning and reservation-based buying. We've added metrics from both Nielsen and third-party verification services like Mote. We've also added more pre-roll inventory through our Amplify program, so there's now more supply of great content that brand advertisers can run OLV again.

We've also seen some good early signs of success around our OLV strategy working out through advertisers and agencies. For example, one of the world's largest agency holding companies now is spending OLV budget with us across several categories, industry categories, that range from tech and telco and retail and CPG.

On the CPG note, one of the CPG advertisers that's running OLV budgets with us remarked to us that Twitter is the only place in social or a fee-based environment that they are running OLV. They are and we are encouraged by the early success we're seeing so far around OLV.

To your point around direct response, on the product side for direct response, we launched website conversions objective. The website conversions objective allows us and marketers to optimize towards conversions versus just clicks, so optimizing towards real outcomes. On average, advertisers are seeing 2.5 times more conversions when they run this objective versus the clicks.

A good example of a marketer using this is the Washington Post. They've been one of our more successful marketers using the website conversions objective. They're seeing five times the conversions now at a cost per conversion that's 88% below their cost per acquisition. Again, a good quarter in terms of product execution for both our brand objectives, and also our direct response objectives.

Great. The next question comes from Doug Anmuth at JPMorgan.

(no audio) question. On the Thursday night football, can you talk about the conversion of new users into regular usage and becoming logged in and using other parts of the service? Also, how you can personalize the timeline experience going forward to make it more valuable? Then Anthony, can you just clarify on the 4Q EBITDA, which I think implies $164 million to $179 million, does that include the $10 million to $20 million of cash costs related to restructuring? Thanks.

Sure. On Thursday night football, I would highlight a couple user metrics that we'll share with you, and over time we can share a lot more. But I really want to emphasize the point that this is one part of a much broader and critical strategy Twitter as it relates to live, and that's to leverage these globally and nationally recognized pieces of content to build awareness of under-served content. They in and of themselves are going to add to our overall usage and audience, but they'll have an indirect benefit to the broader platform, in addition to these other forms of content.

We saw up to 15% of the Thursday Night Football audience on certain games that's logged out. Over time, we will look for opportunities to bring those logged-out users into being logged in, by giving them opportunities to participate with the conversation.

The curated timeline below the live video are tweets that have always been on Twitter around these events. We've aggregated them into an event timeline that brings the conversation together, so you feel like you're watching the game at a bar, in the stadium, or in your home with other fans.

There is a significant opportunity to do that. It's not currently a priority. The number one priority is quality, and we feel like we've really delivered on that. We are focused on a timeline, which is also a priority, because that's the key differentiator for us, is bringing that connected audience together.

In terms of personalization, we've just scratched the surface. By game three, we started to bring in to a certain percentage of the users during the game two personalization elements. One was specific tweets from your graph, as opposed to a timeline that's being created by everyone; and also brought in what we call experts or commentators into the timeline.

Over time, we could make the timeline so it's actually your home timeline, and not just about the game. We could also make it about specific areas of interest. If it's the Patriots versus the Chiefs, we could provide a tab that's just for Patriots fans and just for Chiefs fans. For the debates, just for Republicans or Democrats. There is limitless opportunity to personalize that.

I'm going to flip it over to Jack to talk about our great machine learning technology, and how it plays a key role in all of that. A key differentiator for us to take the billions of tweets that are happening on twitter every day about those events and bring the best to our users in one seamless product integration.

We're focused on adding more machine learning and artificial intelligence to everything that we do. The biggest areas of focus are where people spend the majority of their time, which is the home timeline and notifications; and also making sure that we bias our on-boarding towards topics and interest, rather than accounts.

In the past, we've definitely biased more towards helping people find individuals, rather than meeting them around what they're interested in, and what topics they care about most. We think Twitter is strongest around topics and interests, and we think we can do a much better job there.

We're not just applying machine learning to the core, to the timelines, but also to how we think about video as well. We have some really cool and really awesome technology that enables more and more viewership, because we can do just-in-time compression. We can work on any device type through any network bandwidth, and deliver a high-quality, high-definition experience. We're just starting to apply that technology to our live experience and also to periscope.

We're looking more broadly at everything that we could do around technology and machine learning, specifically to improve all of our experiences to make sure that Twitter continues to be the fastest way to see what's happening, and also the highest-quality way.

Then Doug, on your question about fourth-quarter EBITDA, it does not include restructuring charges. You're likely asking the question that it looks like the EBITDA and margins are a different trend than what we've seen in the prior quarters. What I've said in the past is that we manage margins for the entire year.

We really want to allocate our investments across the most important areas. We don't necessarily manage it by quarter. If we over-deliver EBITDA in one quarter, we want to re-invest in the next quarter for those areas that we weren't able to invest in the prior quarter.

At the beginning of the year, we said EBITDA guidance range of 25% to 27%. We've out-performed. Last quarter we narrowed that guidance to 26% to 27%. Now after third quarter, we've raised it to 27.5% to 28%. That reflects the out-performance, but also a desire to still spend back against some key growth initiatives with a discipline.

The other thing I'd say about the fourth quarter is it does have some quarter-over-quarter cost trends that are different than the rest of the year. It's our seasonally strongest quarter for advertising, and so commissions go up in the fourth quarter relative to the other quarters. Additionally, it's our seasonally strongest third-party network quarter, so tack goes up on a seasonal basis.

Then we're obviously rolling out our live strategy in a very big way, with all the shows that we've talked about in programming. That will require some additional infrastructure expense and hosting and delivery expense. Revenue will come on top of that, but we front-load the expenses there. Those are the drivers of some of the quarter-over-quarter changes, which I think is implied in your question.

Great, that's helpful. Thank you.

We'll take the next question from Twitter. It comes from the account of Debra Williamson. She asks, could you provide some color on your sales restructuring from three channels to two?

Deborah, the overall restructuring move that we're making is taking our three channels -- again, our three channels are our direct sales organization, which is dealing with the largest brand customers, primarily; our mid-market channel, which is mostly telephonic and dealing with direct-response customers, primarily; then our third channel is our SMB channel.

We're essentially taking our first two channels and condensing them down together, so that we end up with just two channels. We had a real 80-20 rule in the second channel, which is 20% of those customers were driving over 80% of the revenue. Ultimately, we think that by appropriately resourcing the overall managed customer base, we're going to give the right level of service to the right advertiser.

Thank you, and we have time for just one last question. The question comes from Justin Post at Bank of America Merrill Lynch.

Thank you. Anthony, a couple questions. Could you comment on the streaming deals and the overall profitability of those versus your core business, just so we can think about that longer term? Then secondly, just housekeeping. We've got questions on the revenue. If you take the margins you put in the letter and you put them over the different EBITDA numbers, you can get to a revenue number. It seems like the range could be $2,500 to $2,600. I just wanted to verify that we're thinking about it the right way? Thank you -- for the year.

Sure. From a cost standpoint, the live initiative really builds on the back of the Amplify program that Adam and the team built over four years ago, and that have partners with content owners on revenue splits. From an economic standpoint, we approached this from the beginning as an investment area, but one that does not require us to lose money.

We're very pleased with the economic profile of the deals that we've done. They're positive from an economic standpoint, and there's a lot of ancillary indirect benefits. But the NFL deal and the rest of the deals individually we're trying to drive towards profitability in each one of those. As we leveraged the model that we have, it's worked very well.

There's a lot of creative things our team is able to do that reduces some of the economic burden. The ads that we get in the NFL games are obviously not every add, so it significantly reduces the cost exposure that we have to that content. That's just one of many ways that we put these different content deals into an economic envelope that works for our business.

I think we got an earlier question from Anthony DiClemente that said what does that bode for the future? I think the important thing for our business relative to others is we're helping these media companies reach a younger audience. As I mentioned, 70% of our audience for the debate and the NFL has been less than 35. We're helping them reach a global audience, and we're helping reach people on mobile. We're doing it in a unique way. We're not just putting video on the platform.

We bring all those benefits to the table, and we also partner. We don't put our brand first. We put our partners' brands first, so we're simulcasting much of the content. It's better for them in a way that's just not about advertising dollars. That's a key differentiator that we continue to plan to leverage.

As it relates to the range, I think you're referring to the full-year range. I don't want to cite any specific numbers. You obviously are very good at math. But our goal was to give you EBITDA and EBITDA margin range, but not talk about specific numbers against that range, even from the end points, because it's so wide.

Thank you. I appreciate it.

Great. Thank you all. I will hand it back to Jack for any closing remarks.

All right, thanks Krista. We appreciate everyone joining us a bit earlier today. As we have shown, our core product initiatives are working, with accelerated growth in daily active usage, tweet impressions, and time spent. We believe revenue growth will follow.

We're being disciplined about how we invest in the business. With a strong plan to simplify our efforts and driving Twitter toward GAAP profitability in 2017. We look forward to sharing further updates on our progress over the coming months. Have a great day.

Ladies and gentlemen, thank you for participating in today's program. This concludes the program. You may all disconnect. Have a good day, everyone.