Twitter (TWTR  ) shares were unchanged immediately after its Q1 earnings result in which the company topped Wall Street's expectations for earnings and sales. However, the stock climbed 20% higher in the ensuing days, largely on optimism around its purchase of newsletter company, Revu. Investors are hopeful that this acquisition will boost the social media company's average revenue per user by helping users on its platform monetize their accounts.

Inside the Numbers

In Q4, Twitter reported $0.38 in earnings per share which was higher than expectations of $0.31 per share. Revenue came in at $1.29 billion which was above consensus expectations of $1.129 billion. However, Twitter fell short in terms of monthly daily active users with 192 million, while analysts were looking for 193.5 million.

In the next quarter, Twitter expects revenue between $940 million and $1.04 billion which is slightly above analysts' expectations. However, the company warned that there will be some "modest impact" from Apple's (AAPL  ) upcoming privacy changes to iOS 14. It also said that headcount will increase by 20% this year with overall expenses increasing by more than 25%.

There were some concerns that the platform's banning of President Donald Trump would result in conservatives leaving the platform en masse. However, this didn't materialize, as the company said user growth remains on track to increase by 20% over the next year. In the conference call, CEO Jack Dorsey said that the platform is "much larger than any one topic or anyone account" and that 80% of users are outside of the U.S., while growth is more driven by interest in different topics.

Ad revenue grew 31% to $1.15 billion. Total ad engagement grew 35% over the same period. Revenue from its Mobile Application Promotion (MAP) offering, a part of its direct response ad business, was up 50%. Twitter believes this initiative will increase engagement and average revenue per user at a rapid rate.

Stock Price Outlook

Over the last three months, the secondary social media stocks like Pinterest (PINS  ), Snap (SNAP  ), and Twitter (TWTR  ) have been major outperformers especially relative to Facebook (FB  ). Many were concerned that these smaller networks would be swallowed up by Facebook. However, they have continued to grow and increase engagement. Further, they've been effective in terms of increasing revenue per user.

Now, Twitter's latest move to buy Revu should help the company find another channel for monetization. Revu is a platform for people to sell newsletter subscriptions. Most of the traffic came from Twitter, so it is a natural fit for the platform. Twitter's platform is clearly a valuable asset that the company has failed to effectively monetize so far. Donald Trump used it to get elected President. Businesses are being built on top of it. This move means that it will be able to capture some of this value more effectively.