推特 (TWTR) 2016 Q4 法說會逐字稿

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

(Operator Instructions)

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

Good morning, everyone, and thanks for joining our Q4 earnings conference call. We have with us today our CEO, Jack Dorsey, and COO and CFO, Anthony Noto. We hope you've had a chance to read our shareholder letter which was published on our Investor Relations website just 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 at @TwitterIR using the hash tag TWTR.

We'd also like to remind everyone that we'll be making forward-looking statements on this call such as our outlook for Q1 and the full year of 2017, and our operational plans and strategies. Actual results could differ materially from those contemplated by our forward-looking statements, and reported 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.

And finally, this call and 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.

And with that, I would like to turn it over to Jack.

Good morning, everyone, and thanks for joining us. I want to start our call today by looking back. 2016 was a transformative year for us. Transformations are difficult, and this one was especially challenging.

We started 2016 by resetting and focusing on why people use Twitter. It's the fastest way to see what's happening and what everyone is talking about. We reset, and we focused on our strengths, and we achieved one of the hardest things to do for a consumer service at scale, we reversed and reaccelerated our usage. We're thrilled to report that daily active usage accelerated for the third quarter in a row, and we see that strong growth continuing.

We did this by making the experience a little better every single day. It may have felt like we weren't changing much this past year, but those hundredths of little changes added up to a more predictable and sustained growth we will now use as a foundation to be more inventive and to take bigger risks. And that's exactly what we're now going to do.

We said on our last call that revenue growth will lag usage. As you see in our numbers and our outlook, this has proven to be the case. Our advertisers need the same approach we applied to our consumer service, reset and focus on our strengths. This means clearly differentiating and complementing Twitter's real-time nature, and proving to advertisers that Twitter is easy, and works for them and their customers.

2016's challenge was reaccelerating our consumer usage. We did it, and that gives us the confidence we can do it again. And 2017's challenge is simplifying and differentiating our revenue products. It will take time to show the results we all want to see, and we're moving forward aggressively.

The whole world is watching Twitter. While we may not be meeting everyone's growth expectations, there's one thing that continues to grow and outpace our peers, Twitter's influence and impact. You don't go a day without hearing about Twitter, [how it] was used as the fastest way to send a message to the world in an instant.

[How] it carries some of the most important commentary and conversations, how it mobilized people into action. That's powerful, it's valuable, it's fundamental, and it's the reason we're all here fighting so hard for the service, and the Company we love.

It's been hard, it will continue to be hard, and it's all worth it. Twitter changed the way the world communicates, and we'll do it again. And now, back to Krista for questions.

Great. Thank you, Karen, can you go ahead and poll for questions?

Certainly.

(Operator Instructions)

Great, thank you. Our first question comes from Brian Fitzgerald at Jefferies.

Hey, guys. This is John on for Brian. Thanks for taking my call. Just was curious about kind of the streamlined focus of the management team now, and how you guys are working to quickly iterate on the new product? And how do you see the set-up going into 2017, and kind of what are some of the product focuses that will be kind of rolled out to simplify the user experience? Thanks.

Hey, John, thanks for your question. So we spent a lot of our time in 2016, really focused on making sure that we have identified and clarified to the team, and into our priorities what matters most, in terms of the use case. So the use case that is fundamental to Twitter is being able to show what's happening immediately, being able to get people their news immediately, about anything that's new and noteworthy, and also to show all the commentary and conversations around it.

So that led us to one of the most important areas, which is the home time line, and making that more relevant, not just recent. Notifications, making those more relevant so that we can tell people what's breaking, and what they should be -- what they should direct their attention to, and easier on-boarding, and also easier ways to tweet. We've done a lot of work across those four areas, and we're really excited that we're actually seeing that in the results as well.

Something that we launched just recently, was our explore tab, which is a different way of organizing information on Twitter based around topics. So we organized search, moments, trends and topics into one area that you could go to, after you exhaust your timeline, to find new things that are happening in the world, and new topics that you might be interested, and ultimately want to follow.

So the majority of our effort will continue to be in the time line and in notifications, to make that simpler and easier for people to see what's happening, but also to participate and converse. But we're going to put a lot of attention into explore, and making sure that we show more topics faster. This is also an area where we can show off our live-streaming games, debates, elections, and events, so it's an easier place to find, any time that there's something live going on at Twitter. And any topic that you might find or hear about in the world, that you want to dive into on Twitter as well.

We're also using the foundation that we built in 2016, and all the growth that we're now seeing from that focus, as an opportunity to take some bigger risks, and to take some bigger bets within the consumer product as well. Nothing to announce today, but we have some ideas that we're currently exploring.

Great. Thanks, Jack.

Thank you.

Thanks. And our next question comes from Heath Terry at Goldman Sachs. Heath, please go ahead.

Great, thanks. Jack, I was wondering if you could give us a sense of how notifications and efforts to drive engagement through [push] has impacted the acceleration in DAU growth? Obviously, they're a lot of topical things this quarter that drove engagement on its own, but if you have a sense of how much of that engagement growth was driven by those kinds of actions from Twitter, that would be helpful, and potentially how sustainable you think that is?

Hey, thanks, Heath, it's Anthony. The acceleration that we're seeing in daily active user growth for the third consecutive quarter is primarily driven by product changes and marketing. And within product as Jack mentioned, the home time line work, as well as notifications have been big contributors to that. But there's been smaller contributions from a number of other iterations throughout the product.

As we've said in the past, the changes that we're making and rapidly launching that are statistically positive in our testing, they compound on top of each other. And so, I don't want to over-emphasize one area versus the other, but those two are larger contributors than the smaller, but effective other changes within the product itself.

As it relates to engagement, we look at two measures that we talk about in the shareholder letter. One is tweet impressions, the other is user active minutes, or time spent within the service, and both are up double-digits for the third quarter in a row. And that again, reflects the combination of the product changes, as well as marketing changes.

Okay, great. Thank you.

And our next question comes from Rich Greenfield at BTIG. Rich, please go ahead.

Hi. Thanks for taking the question. A couple. First, when you look at the double-digit growth in DAUs and time spent you mentioned, has that continued into Q1, and where does DAU/MAU stand? And then, the second point, Jack, I think you made a comment in your opening remarks about kind of bigger bets as we move into 2017. What are you exactly talking about, is there anything you can give us a sense of? Are you working on a longer form video product, what would be the strategic rationale there?

Thanks, Rich. On your first question, as it relates to the DAU trend and engagement trend as we go into the first quarter, we're very pleased to see our third quarter of accelerating growth in daily active users, and the double-digit growth in impressions. And we're also pleased to say that the trends do continue into the first quarter.

We're seeing strong growth in the first quarter. Ultimately, the quarter's not over yet, and we have to do the analysis on the key drivers of the trends in the first quarter, but what I would say, is the growth in the first quarter in DAUs remains strong.

And then in terms of the -- in terms of the bigger bets, we did make a big bet in live-streaming, and bringing that to the platform, and that was an entirely new experience that we're able to build in just three months. So we executed really well to create an experience that is consistent with how we've seen people use Twitter for the past 10 years, which is commenting, and having conversation about a live event.

What we did, was make it a lot easier to see anywhere. And so, if you're on the train, or commuting home, or commuting to work, or at the office, you can see the NFL game, or you can see the debate anywhere you are. So we're looking at all of the patterns that we've seen for the past 10 years on how people use Twitter, and to create experiences around that, that make it easier to share what's happening, to talk about what's happening, and to see it much faster.

The other thing that we're investing a lot in, is making sure that we apply machine learning more broadly around our entire experience. We recently hired [Jan Petersen] to consolidate all of our science efforts, all of our deep learning, all of our machine learning, and artificial intelligence. So that we can get a lot smarter and provide more magical experiences for people, around showing them what's breaking in real-time, and giving them a sense of what's going on, without having to do as much work as they currently have to do on the platform.

So we're looking at a lot of opportunities to organize all of the tweets around relevance, but also around the topics, and the interest, and the passions that people care about. We have a really unique differentiator in Twitter, in that people come to us because of interest, and build interest networks around that. And we think there's a lot of room for new experiences around that. (multiple speakers).

Yes, go ahead.

Rich, the only thing I would add to that is as we think about budgeting for Live in 2017, which may be the question behind your question is, we're not focused on live form content. We are focused on all of the use cases that Jack mentioned, but to specifically make it clear, we're not focused on changing our economic model for Live which is, replicates the success that we've had in Amplify, and we're not focused on long form content. It's more of what you've seen in platform in sports, news, and entertainment, and more globally.

And if I could just follow-up, I think it's something you both touched on. One of the things that we've been very critical of Twitter on over the last several years is, it's been more of a passive platform, where people have just been reading almost RSS like. And my sense is, over the course of the last couple months or last six months, that you've seen an improvement in people actually engaging, whether that's actually tweeting themselves or liking or retweeting. Have you seen any [notable], is there anything that you could talk to in terms of statistically, what you're actually seeing in terms of people, not just on the platform, but actually engaging actively in the platform?

Rich, the best way to answer that question is the result of key metrics, and that's tweet impressions and time spent. Double-digit growth in tweet impressions for three quarters in a row is impressive.

I've said on the call and prior calls, that our tweet impressions total in the 10s of billions. To move tweet impressions up 10% requires significant events, not just in one day, but across a 90 day period. And I think I've talked in the past about even on nights of the Presidential debates, we would have like a 10% lift in tweet impressions.

And even if I assume all that lift is incremental, it only could translate into a 0.1% lift in impressions for the entire quarter. So to get double-digit growth for an entire quarter in impressions for three quarters in a row, it takes a fundamental change. And that's being driven by machine learning and the time line, it's being driven by better notifications from our relevant content, and all the things that Jack talked about.

The other measure we look at, because we do have a significant amount of video on the platform, and that continues to increase, is user active minutes, and that also has been up double-digits. So we're really encouraged by the outputs, but the inputs are really the product changes that are driving those engagement trends.

And I would add, there's still a lot of opportunity to see it even more, as we make it easier and easier for people to tweet, and we focus a lot more on topics that people want to talk about and participate with.

So that just makes brand advertising that much more compelling as an opportunity for you, as you move in, even more so than direct response?

The majority of our revenue remains branded advertising. It's the area that we've had the most success. We've obviously evolved the formats within branded advertising into video.

We're seeing really strong trends behind our video products, especially the Amplify product and the Live product. They're very differentiated, and they're more organic to the platform. So we'll continue to invest in those ad products that do just that, and that does appeal to the branded advertiser.

Thanks, Rich.

Thanks.

And our next question comes from Anthony DiClemente at Nomura. Anthony, please go ahead.

Thanks, Krista, and good morning, and thanks for taking my questions. So in terms of why the acceleration in DAU growth, tweet impressions, and time spent has not yet translated into monetization. Just want to make sure we all come away with a clear understanding of the reasons why that is. So you mentioned in the shareholder letter, escalating competition from digital -- for digital ad spend, direct response declining, promoted tweets declining.

Can you, Anthony, elaborate a little bit on those three, or dimensionalize those factors for us, where's the greatest pressure coming from? And then, as those factors are sort of fundamental factors or headwinds to you in terms of monetization, how much of it is those versus sales force leadership transition, so fundamental factors versus organizational factors, as you have this kind of disruption or transition for your sales force leadership? Thanks a lot.

Sure, let me answer the second question first, and then I'll come back to your first question. And I'll focus it primarily on our outlook, because I think that's where the bulk of the -- where the focus, it will really be today.

We've looked at a number of different ways of analyzing the business, both from organizational impact, as well as just fundamental trends. And one of the things that we looked at, on the back of our reorganization of the sales force at the end of Q3, was the performance of those accounts that changed hands or consolidated, versus the performance of those accounts from a spending standpoint that were not affected. And there was no difference in the trend. So there's no quantitative analysis that shows that we've had an organizational impact due to the restructuring.

Obviously, maintaining consistency over time is really important, but that specific factor doesn't appear to have any impact on our revenue performance or on our outlook. That said, similar to the fourth quarter, similar to the fourth quarter, we provided an EBITDA range and EBITDA margin range which gives an implied range of revenue that's quite wide. And there's a number of changing factors in our business that result in that really wide range, and why we'll continue to focus on EBITDA and EBITDA margin, as opposed to a narrower range in revenue like we used to do.

And the thing I would emphasize is that range really reflects a couple of things. We haven't been able to leverage the more attractive ROI potential of our [audience] acceleration and the double-digit growth in inventory, and frankly, the significantly lower prices that we have now. And we haven't been able to do that yet. We do believe that is a matter of when, not if.

The budget allocations that are reflected in our guidance, they really reflect our audience and pricing trends 6 to 12 months ago, when we had no growth in audience, or even a decline in audience, and the headlines really questioned our ability to sustain our audience growth. Those long lead times caused the outlook to reflect 6 to 12 months ago, and the benefit that we're seeing today to be on the [come], 6 to 12 months from now.

So what are we doing to (inaudible) since the audience growth and the engagement growth? We're sitting down with branded advertisers, and we're sharing with them the positive trends. We're taking them through the increased inventory, the higher scale, the greater growth, all of which we think can lead to better ROI and helping them [run] through their models, so that we get better allocation over the next 6 to 12 months.

In addition to that trend, it's important to understand that in the quarter, we did see -- in the quarter, the first quarter, we did see an acceleration in the competitive environment for branded advertising since mid January.

And then the final point I'd make, which is somewhat tied to organizational decisions, as opposed to execution or marketplace decisions, is that we are taking a step back, and looking to simplify our product, and putting our resources behind those products that we think have the greatest probability of success, that can deliver the best long-term growth potential, and that frankly, leverage our competitive advantages in a unique way.

That may cause us to deemphasize some products that are producing revenue, in addition to the decisions that we've already made, as it relates and we talked about in the letter as it relates to TellApart. So that's the underlying trends that are impacting the guidance. And your next question is likely going to be, what's in the guidance? So I'll just go ahead and answer that.

Okay. (laughter)

The high end of that broad range, the high end of that broad range, the growth rate, that's the growth rate that we saw in early January. So if you take the extreme ends of the implied revenue range, the high end of that growth rate would reflect what we saw in early January.

The mid point growth rate reflects what we're seeing now. And then the lower end, reflects a more challenging competitive environment than we're seeing now, and the potential for us to deemphasize some of our products that are revenue producing. So hopefully, that gives you a perspective on the marketplace factors that are impacting our outlook.

Okay, thank you very much.

Thank you. And the next question comes from Twitter, from the Twitter account of Neil Doshi, and he asks how did the engagement trends of live streaming football, how did it trend throughout Q4?

So on Live in particular, what I'd say is the NFL was one important factor in the overall strategy. We are incredibly happy with the outcome of Thursday Night Football programming. We're able to exceed the high end of our unique viewer expectations at 3.5 million unique viewers using the MRC definition, the standard.

In addition to that, we're able to learn a lot about how to innovate on the product, to drive discovery without a destination, to use organic mechanisms within the product. And most importantly, the quality of the product was our number one priority through the year, and we've received nothing but really high praise for the quality, and of the video, in addition to the low latency.

We obviously want to build on that in 2017, and it's one part of our broader strategy to drive greater engagement of those that are already on our platform, and to attract new users to the platform. So we're very pleased with it. As it relates to our partners, the NFL was really interested reaching a new audience, and they're interested reaching a younger audience, and a non-US audience, and a more diverse gender split. We were able to accomplish that with them.

We drove a significant amount of viewership from outside the United States. The average age -- the age of less than 20 -- the percentage of the audience that less than 25 years old was 50%. And in addition to the fact that majority of the people that consumed the product were not in front of televisions, and they only consumed it on mobile applications. And so, that was a really positive outcome.

And then finally for our partners, CBS and NBC and our advertising partners, we're able to leverage our innovation on mid-roll advertising that used dynamic ad insertion to mobile devices, over-the-top applications, and to the desktop web which is a great innovation, and allowed us to deliver specific ads, to specific individuals, from specific advertisers all at the same time. Those ads had 95% completion rates with sound on, which is very attractive for our advertising partners, and obviously can result in high CPMs.

Great, thank you. And the next question comes from Doug Anmuth at JPMorgan. Please go ahead, Doug.

Thanks for taking the question. I just wanted to follow-up on the advertising side. Anthony, can you just talk more about how you'll simplify and differentiate the ad products, and if you can talk to about reevaluating the product feature portfolio? And given all of that, do you think you can grow revenue in 2017? Thanks.

From a revenue product standpoint, I think it's important to really understand our evolution. The first products that we developed on the platform were really organic products. They were organic actions on Twitter that we then took to a promoted standpoint. Those products have been very successful.

We evolved those formats from those to video, and the video elements of our advertising business are doing very well, specifically, the Amplify products, as well as the Live products that I mentioned, and we'll continue to invest in those products. We've also had success in similar direct response products that have achieved significant scale, and we'll continue to invest in those.

In the shareholder letter, we talked about some of the direct response products that are challenged. We're going to reevaluate whether we can be competitive in those products, or if we're better off reallocating resources to products that are doing really well, or new areas of innovation that are more organic, and more unique and differentiated to Twitter, and that drive really strong engagement. And so, that's the philosophy, it's a disciplined approach, the same approach that we took to consumer in 2016, and one that we think will bear fruit over time.

In terms of the lead time to getting back to revenue growth, as I said the majority of our revenue is still branded advertising. They have very long lead times for allocating the majority of their budgets, not all of their budgets, but we can still fight day-to-day for in-market budgets. But we really have to be in the process of being part of their marketing mix analysis that's done annually or biannually, and making sure that we're using the new data, and the better audience size, and the better pricing to get greater allocation of their budgets. As I mentioned, they do that every 6 to 12 months, and so we've started that process, but it's the very beginning.

Thank you.

Thanks, and the next question comes from Youssef Squali at Cantor Fitzgerald. Please go ahead.

Okay, thanks, Krista. Good morning, everyone. So two quick questions. Anthony, I know you won't quantify the NFL deal, but just from a revenue standpoint, did it -- was it in line with your expectations, did you guys actually end up making money on that deal, and will it be renewed?

And second, Jack, considering the challenges ahead for Twitter in 2017 that you discussed, can you talk about the organizational structure at the higher level senior executives, and any changes to your plan to continue to run both Twitter and Square? Thanks.

On the NFL, it really exceeded our expectations on both revenue and profitability, for both us and for our partners. It was a part of a much broader strategy that allowed us to build on the back of that, so there's a direct value to the NFL, and there's an indirect value to the NFL. We had 600 hours of live video content programming on the platform in Q4, and it was pretty diverse, about 50% in sports, about 40% in news and politics, and 10% in live. So there's both a direct benefit and indirect benefit.

I think at the end of the day, all of the reasons the NFL chose us as their partner, we delivered on and exceeded. As I mentioned earlier, the fact we're able to deliver a younger audience, 50% younger than 25, 25% of the audience was international, 12% of the audience leveraged are not logged in users. All those things rang true, and we will look to partner with them in a bigger way.

And I would note the NFL relationship is not just about Thursday Night Football programming. We've had a four year relationship with them on Amplify, and we look to extend that relationship to things beyond just the regular season.

And Youssef, on the leadership team, so late last year, we really flattened the organization, so that we could elevate engineering product and design to report directly to me, so I could be a lot closer to the products. Now that we spent a year really going through, and making sure that we reset the foundation on what we're executing, what our priorities are, and how we execute from an engineering perspective, we have a lot more confidence that we can move a lot faster on bigger things, because we've taken care of a lot of the things that we're just not simple enough, and a lot of the tech [debt] that we needed to address immediately, so that we could develop much faster, and bring new experiences to light.

And I'm really confident in this team. Ed Ho is leading all of our consumer service. He's been with the Company for over two years, and he's shown a lot of great promise, and he led a lot of our effort to make sure that we're focused on the right initiatives to actually reaccelerate our growth, and has proven a lot to the Company, and also to his team.

He's also been able to attract really senior product leads as well, Keith Coleman being the most recent, who also brought an amazing engineering team with him, to lead the consumer product efforts. And then, we've been consolidating organizations to build our strength, most notably in our machine learning and artificial intelligence efforts, which is critical to us being able to move much faster.

So [Jan Peterson] joined, and is now just doing the work to get everyone on the same page, and make sure that we have a platform internally, that every team can use, to provide better and more magical experiences on Twitter through machine learning and artificial intelligence. And this focus and this team allows me, and gives me a lot of confidence, I can continue to focus on the most meaningful things at both companies, and that we have the right prioritization in front of us.

Thanks, Jack.

Thank you. And then, next question comes from Mark Mahaney at RBC Capital Markets. Mark, please go ahead.

Okay, thanks, two questions. One for Jack, the acceleration in DAU growth is clear. It's impressive, but I'm surprised we haven't seen a little bit more movement in the MAU. And I guess, just given all of the publicity around the President and his use of Twitter, what's your interpretation of what kind of impact that's having on overall usage? Do you think that's been negligible, negative or positive?

And Anthony, I think you made a comment to the effect that you've seen greater competition for advertising in the middle of January? I think you said that. Is there any particular reason, any thought you have as to why, at that particular moment you started to see that acceleration in competition? Thank you.

Sure. Thank you, Mark. On your first question, what I would say is that the President's use of Twitter has broadened the awareness of how the platform can be used, and it shows the power of Twitter. When he tweets, it sparks conversation and discussion. So at a macro level, discussion of the platform really helps us be the best at showing what's happening in the world, and more discussion strengthens our key differentiators, in comprehensive and fast.

From a quantitative perspective, what I'd say, is each quarter we measure and analyze factors that drive cause causal growth in the audience, not coincident growth. In the fourth quarter, the primary driver of our growth was as I said, our product changes in marketing. We also look at a couple of other factors to see if there's any significant changes in those trend lines. So our top of the funnel is one of those areas that could have benefited, and we did not see a benefit to the top of the funnel from all of the activity throughout the election time period.

As it relates to impressions growth, which is another area we look at, as I mentioned earlier, the magnitude of the impressions of the platform is so large, it'd be very hard for an event, or a single person to drive sustained growth in impressions growth. All of that said, having the world's leaders on our platform, talking about global issues, people being passionately expressing their points of view, that's all positive for Twitter, and that's what we're focused on.

So any time that we can drive faster distribution of content, more comprehensive of content, more discussion or more personalization, we're better at delivering what's happening in the world, and what's being talked about. But we can't quantify any impact at this point in time. But we'll continue to analyze it as we go through Q1, and talk to you at the end of the quarter.

As it relates to your second question, listen, the environment has definitely been more competitive throughout 2016 than 2015. On prior calls, we've talked about the fact that there are more large scale players in digital advertising and social advertising budgets now than in prior years. That's only increased throughout 2016.

In 2017, I think what we saw in mid January, as it relates to the acceleration of competitive factors, it's really when advertisers start to ramp up their spending coming out of the fourth quarter. February is a time period that historically has been up 35% to 40% versus January, and that ramp really starts in mid January through February. And that's when we saw more marketplace challenges in our ability to attract demand from advertisers.

I think there's a number of factors behind that, more players, more innovation. Some of the competitors have a lot more at stake at this moment in time. The good news is, revenue follows audience, we're seeing acceleration in our audience growth.

We want to translate that into revenue dollars. That requires us [proving] ROI, and we're in the process of doing that with our advertisers. In addition to that, we're focused on other revenue streams that are not ad-driven, and areas of low-hanging opportunity where we have audiences that aren't being monetized.

And the final point I'd make is, what we're doing in video positions us to capture ad dollars that are not in this very competitive digital advertising bucket, and we've started to tap into those dollars through our Live video product, and we'll continue to invest in that area as well.

Thank you.

Thanks, and the next question comes from Peter Stabler at Wells Fargo. Peter, please go ahead.

Thanks, two if I could. Wondering if you could give us some DAU growth color by region? The numbers are looking good, they're improving. Can you compare and contrast US, Europe, rest of world?

And then, kind of more of a philosophical partnership question. In the early days of Twitter, you worked aggressively to extend the tweet footprint through partnerships with media companies. And I guess, from a perspective of distributing tweet content, and I'm just wondering in light of the election and Trump's use of Twitter, when you look back at that strategy, and then just wonder if maybe that you provide a disincentive for users to actually explore the platform? If they feel like they're consuming a lot of this tweet content through media partners instead? Thanks so much.

Thank you, Peter. As it relates to daily active users and growth, globally we saw our third consecutive quarter of acceleration globally. I'd tell you that it's pretty diverse by geography, 8 of our top 10 markets saw a faster growth rate in DAUs in Q4 of 2016 on a year-over-year basis, than Q3 of 2016 including the United States. So that's 8 of our top 10 markets. So we're very pleased with that.

As it relates to your second question on partnerships, I would say the complete opposite. The fact that we have our tweets broadly distributed creates a competitive advantage for us. The fact that our tweets are publicly available creates a competitive advantage for us. It allows us to break news. It allows us to be the fastest, and that's critically important.

The reason why we know that's the right strategy, and the reason why we're confident in it, is not just that it's the fastest, and it allows us to break news. But when we look at the top of our funnel every day, we've said on the calls in the past, that we have millions of people that are new or resurrected, i.e. they're not currently a user in the last 30 days, that comes to the top of our funnel every day.

And that's a massive number that translates into over 400 million on a quarterly basis, and 700 million on an annual basis of that translate into actual users. If we saw a decline in the top of our funnel that was significant, your concern would start to concern us as well, as well as other factors. But we have not seen that, and we think it's a competitive advantage, and it actually reinforces that top of the funnel dynamic that we benefit from, and that still creates such a unique opportunity for us.

Thank you, Anthony.

Thank you. And the next question comes from Twitter from the account of [AEHokes], and they ask, why is it so hard to find live video shows like The Rally and college sports? Will you be making a dedicated Live tab on Twitter?

Yes, so we did focus a lot of our attention early on in building out live events and live premium video on the experience as Anthony said earlier. Now our focus is making sure that we are connecting people faster, with their interests, and with the topics they care about.

And that includes being able to watch an event directly on Twitter. So the explore tab is one area that you'll be able to go to for any live event. But we're also looking at others areas that get you to that much faster, if you express an interest in a debate for instance or in a game, or in new show or entertainment. So this is the focus of the team, and something that we're going to make a lot of progress on this year.

Thank you. And our next question comes from Justin Post at Merrill Lynch. Justin, please go ahead.

Thank you. My first question is just on ad loads. And are you -- it seems like you're shrinking the ad loads. How do you feel about those right now, and is part of the revenue pressure just cleaning up advertising that wasn't that effective on Twitter which helps the user experience?

And the second question is just on video. You mentioned a ton of programming, I don't know how much it affected usage. But when you think about the revenue model, and the profitability of advertising around video, and there might be a partner involved, how does that compare to the kind of the standard news feed ads? Thank you.

In terms of ad load, we've talked about ad load in the past, because we're actually growing our audience at an accelerating rate and double-digit impressions growth that's our inventory, we've been able to take some pressure off ad load. The fourth quarter is the seasonally strongest quarter, and currently ad load is down from where we were in the fourth quarter. And as we continue to grow our audience and engagement faster than our overall revenue growth, we will continue to see some benefits there.

There are factors that could cause it to go the other way, if we saw an increased mix of DR on the platform, we would have pressure on ad load. Similarly, if we saw increased mix of video product, we would have alleviation of the ad load. And so, mix is a really big factor, in addition to seasonality. But their overall trend of faster audience growth, and faster engagement growth than revenue bodes well for ad load, absent [and] mix changes.

As it relates to the video product, what I'd say is the unique thing about some of our video products, is it provides two benefits. One obviously, is we're getting content on the platform, and then second, we're getting revenue on top of that platform. So our Amplify product was the first product that tied revenue specifically to content, and that model has worked really well for us.

There is a revenue split involved, but the CPMs tied to those video products are relatively high, and the yield of them on an effective CPM basis is relatively high. So it's a very good product for us. It also provides an opportunity to drive regular promoted tweet spending. So for example, if I have a highlight from a media partner, and have the six second pre-roll, there's revenue tied to that tweet specifically, that partner could then promote that tweet, the way it would a normal promoted tweet, and there's a secondary form of revenue that also drives more awareness of that content and more engagement.

And so we really want to find these products that have multiple benefits, not just revenue but also content, and then also driving [virality] on the platform and faster distribution. And so, we think the video product that the team created in Amplify is a great product, and what we are doing in Live mid-rolls complements that. And we've now moved into a product area, where we have a marketplace, where content owners can put the content into the marketplace. And advertisers can pick that content, and not only put an ad in front of it, but promote it. And that's something we just launched in the fourth quarter in the United States, and some of it will rollout internationally in 2017.

Thank you.

Thank you. And the next question comes from Dan Salmon at BMO Capital Markets. Please go ahead, Dan.

Hey, good morning, everyone. Could you speak a little bit about the sale of Fabric, and perhaps use that as an opportunity to just talk a little bit more about the type of products, the type of bets where you're taking focus away a little bit, and focusing on the bigger bets? Thank you.

As it relates to Fabric, 2016, we really took a hard look at our costs. We wanted to set a cost base that would provide us an opportunity to drive progress towards GAAP profitability. We have that cost base. And part of that decision process was really looking at what was core and critical for Twitter, and reinforce the overall objective that we're driving.

Jack kicked off the call, and talked about we know exactly who we are. We're the best at showing you what's happening in the world, and what's being talked about, so things that don't directly impact or non-core. And those things that can provide an indirect impact to that, are also things that we want to invest in.

The Fabric business unfortunately didn't fall into either of those two categories, and it was a large investment area to us. The team did a phenomenal job taking the acquisition of Crashlytics and taking it from one SDK, to an SDK of SDKs that was carried in 2 billion devices. Unfortunately, that just didn't provide value to us in our core activity that we're focused on, and so we made the tough decision to divest the asset.

We had a couple of priorities. Obviously, the first one is to maximize shareholder value. Secondarily, we wanted to make sure that we did it in a way, that really benefited the development community, and kept a state of stability for them during that transition.

Google turned out to be that partner that could provide both of those things, in the best way. They showed a real commitment post-transaction to the developer community, and that was a really important element in our decision on where the product went, in addition to maximizing shareholder value. So it was a tough decision, but one that we think is right for the long-term, and that will be critical for us having the right cost base on our path towards profitability.

Yes, Anthony said we focused all of 2016 on making sure that we are really aligned around that one use case, of showing what's happening before anyone else, being the best place to get your news, and all the conversation and commentary that's going on in the world. So we made tough choices, not just with Fabric, but also with things like Vine, so that we could make sure that we're putting all of our effort behind Twitter, and what has made Twitter great over the past 10 years.

And looking for new opportunities to extend that sense, that use case, and extend that sense of what's happening, and live video is a big focus of that as well. So everything that we're doing around live streaming premium video within the app, and also with individual-created live streaming video. And Periscope has been the majority of our focus, and we wanted to cut everything that did not go against that, and did not matter.

Great, thanks, guys.

Thank you. We have time for just one last question, and that question comes from Brian Nowak at Morgan Stanley. Brian, please go ahead.

Thanks for taking my questions. I have two. One for Anthony, and one for Jack. First, Anthony, very good accelerating DAU and time spent trends.

Just curious, is there any way you could help us, just kind of understand at a high level, how many DAUs there are, and how much time they're spending per day? And then as one more follow-up, Anthony you talked about potential reevaluating some of the DR products. Is that embedded into guidance, or how should we think about expectation in guidance on DR? And Jack, I guess, I'd be curious to hear what has surprised you most over the last year-plus as you've been CEO? And if you were to lay down at night, and say if I execute on X and Y in 2017, what will be successful as a Company, what is X and Y?

Thank you, Brian. As we think about DAUs and the other metrics that you mentioned, we reevaluate what metrics we're going to share with you from a disclosure standpoint at the end of each year, we've obviously moved down the path of reporting more than just MAUs. We're now providing you with DAU growth, as well as a growth trend in our engagement metrics. We think the growth rates are the things that we're most comfortable with sharing at this time, and we're going to stick with that.

As it relates to the DR question, I want to make it really clear that our DR business has really three characteristics. The first is, we have some products that have achieved success and significant levels of revenue, and we want to continue to invest in those, and that's really important.

We have some products that have achieved scale and revenue, but that scale has been limited based on ROI calculations. As you know, direct response advertisers are very quantitative in their analysis, and if you're not delivering the right ROI, the spending gets cut off.

And as we've talked about on the calls in the past, we really need to improve our targeting capabilities, improve our measurement capabilities, improve our creative capabilities, to get some of our DR products to continue to scale the way our successful ones have. And that has been a process for the last two years, and now the time to take a step back and saying, is it too complicated, is it too resource intensive, would we get a better return from those resources, allocate to things we have greater strength in, or that are more differentiated?

And the third bucket, which is not going to be obvious to everyone, is we've made some investment decisions in some DR products that have not come to market, that have had significant resources allocated to them, that haven't gotten to the point that we could launch them. And we need to rethink about those resources and that level of investment, and whether we should reallocate it.

In terms of the guidance, I kind of gave some color up front, but what I'd say is, at the -- there's an implied range of revenue, and it's pretty wide. At the higher end of that, it assumes there's no change in our portfolio of revenue products. At the mid point, I would say there is some change, but not as meaningful as the low point. The low point would require some meaningful changes in some of the products that are producing revenue, and that's an evaluation process that we're going through.

And Brian, I would say, that -- I don't know if it's surprising, but the every single year, the fact that Twitter just grows, and its impact and influence, and how instrumental it is in the global conversation, how essential it's become as one of the first places people go to get a sense of what people are thinking, and what people are saying about any global event. It's a lot closer to home right now, with a lot of this conversation happening around the US election and the administration. And that's been amazing to see unfold, and definitely been a learning moment for us.

But I think the thing that constantly inspires me, is just how important, how essential Twitter continues to become. And as I look to 2017, and we look at what we can do, I just think the super power we really provide the world is, we that can break news, and get information to people faster than any other service in the world. And in order to do that, people have to do just a ton of work right now, to dig through everything that may not matter to them to find something that really does.

And that's why I'm excited about really making sure that we apply artificial intelligence and machine learning in the right ways, and that we really meet that super power, of being that little bird that told you something that you couldn't find anywhere else. And that when you get into the application, and when you get into the service, that it is as easy as looking out the window to see what's going on. And we have a lot of work to do.

We have a lot of tabs, we have a lot of syntax that we still put in front of people. And it should be as easy as just opening up your phone or the web page, and you instantly get a sense of what matters most, what people are thinking about it, and how to contribute, and how to participate. And I really believe and confident that we can get this to something much simpler for everyone within this year, and that excites me a lot. We've hit the 10 year mark, we're about to be 11, and this is a Company that endures and lasts and thrives.

Thanks.

Thank you. And Jack, I'll turn it back to you for any closing thoughts you might have.

Yes. So in closing, as I said I've never been more sure of the value Twitter brings to people and our world. And people trust us to carry some of the most important conversations, commentary, critique, events, ideas and questions in the world. And we have proven now that our focus works, and we need to apply the same approach to our revenue products, and help our advertisers. In doing so, advances us towards our ultimate goal of building a Company and service that empowers generation after generation. I want to thank you all for your time, your support, and we'll see you on Twitter.

Thank you.

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