Twitter Inc.’s revenue plunged 19% in the second quarter as Chief Executive Officer Jack Dorsey said the company is exploring subscription options to address Twitter’s reliance on advertising.

For the quarter ended June 30, Twitter reported revenue of $683 million, down 19% from a year ago and below analysts’ expectations of $707 million. The drop was driven by ad revenue, which declined 23% year-over-year, to $562 million.

Loss per share in the quarter came in at $1.39 on a $1.2 billion loss but as CNBC noted the figure was weighed down by a $1.1 billion loss related to a noncash deferred tax asset, making it difficult to compare to previous quarters and analyst estimates.  Total costs and expenses increased 5%, to $807 million, because of headcount growth, resulting in an operating loss of $124 million.

It wasn’t all doom and gloom for Twitter as the microblogging platform reported 186 million monetizable daily active users, its preferred metric, up 34% over the second quarter of 2019 and well ahead of the 172.8 million predicted by market analysts. The increase in mDAUs was primarily attributed to external factors, including shelter-in-place requirements and increased conversations around the COVID-19 pandemic.

Twitter noted in its letter to shareholders that while ad revenue had been driven down by the decline in ad spending caused by the COVID-19 pandemic, revenue had started to recover relative to the last three weeks of March. The exception was late May and early June because brands slowed or paused ad spending in reaction to ongoing civil unrest in the U.S.

In an investor call after the results were released, Dorsey said that Twitter was in the “very, very early phases” of exploring subscriptions to add a revenue stream for the company that is not reliant on ads. He added that users “will likely see some tests this year” and that there is “a really high bar for when we would ask consumers to pay for aspects of Twitter.” Exactly what a subscription offering of Twitter would involve was not specified.

That Twitter is exploring different ways to make money is not surprising given that it currently relies on advertising for 82% of its revenue. The company has both benefited and suffered from the pandemic, with a surging user base at the same time its ad revenue has taken a hit, so diversifying its revenue base would be a logical step to take.

The quarterly earnings report comes at a tumultuous time for Twitter after it has been making headlines for a hack in which accounts belonging to some of its most high-profile users were hijacked. Dorsey apologized for the hack on the call, say that “we feel terrible” and that Twitter had taken steps to improve its security and “resiliency against targeted social engineering attempts.”

Despite the COVID-19 hit to its advertising revenue, investors liked the surge in user numbers as indicative of Twitter’s financial prospects going forward once COVID-19 passes. Twitter shares closed up 4% in regular trading, to $38.44, their highest price since February.

Image: Shawn Campbell/Flickr