Twitter user growth stalls in fourth quarter

Twitter’s average monthly active users stalled in the fourth quarter - the first flat quarter sequentially since the company listed in 2013.

Twitter said in a filing it had 320 million average monthly active users in the quarter, in line with the third quarter and lagging a forecast for 323 million users from RBC Capital Markets. Revenue rose 48.3 per cent to $710.5 million in the quarter ended December 31st.

Revenue in the current period will be $595 million to $610 million, the social network said in a statement. That compared with an average analyst projection of $627.6 million.

Share price falls

Twitter shares have dropped 35 per cent this year amid deepening scepticism about the company’s turnaround efforts under Jack Dorsey, a co-founder who returned late last year as chief executive officer.

Dorsey, who started his tenure in October with staff cuts and the appointment of a new chairman, has been rallying his teams to make the site more accessible and useful for following news stories and live events, but the company has so far been slow to attract a wider audience -- and the potentially higher advertising spending that comes with it. “This is the critical period for Twitter, and they need to show more than just optimism,” said Rob Sanderson, an analyst at MKM Partners. “It’s very vulnerable right now, and especially if we are heading into a recessionary environment, those ad dollars are going to become more difficult to get -- for everybody.”

The company’s shares slid as much as 14 per cent after the earnings report.

In the fourth quarter, sales rose 48 per cent to $710.5 million, in line with analysts’ predictions. Excluding certain costs, fourth-quarter profit was 16 cents a share, compared with an average analyst estimate of 12 cents. The company’s net loss narrowed to $90.2 million, or 13 cents, Twitter said in the statement.

Dorsey’s tenure

Twitter appointed Dorsey as permanent CEO in October after a search to replace Dick Costolo, who resigned amid pressure from Wall Street over slowing growth. Dorsey, who also runs payments company Square Inc, has been pushing the staff to change even the aspects of Twitter’s site that seem untouchable. For example, Twitter has considered lifting a 140-character limit in posts, which has been the format since the company started.

New format

Earlier Wednesday, Twitter said it would start displaying more popular tweets at the top of a user’s feed, instead of keeping them in the company’s traditional reverse- chronological stream.

The company is also working to deal with its user-growth challenge another way: by making it possible for non-members to see advertisements if they click on a tweet, say, in a Google search or a news article.

Opening up advertising to that audience adds 500 million people, Twitter has said, and makes its business model more like YouTube’s - you don’t have to log in to be valuable to the company.

Still, Dorsey’s job hasn’t been easy. A week after he officially retook the helm, Twitter cut 8 per cent of its staff.

In January, five executives, including the heads of product and engineering, announced their departures during the same weekend. The company has lost at least 20 high-level executives since its November 2013 initial public offering.

Meanwhile, social-media competitors like Instagram and Snapchat are amassing larger audiences and focusing their products more on what

Twitter does best: real-time news and information. Larger rivals, like Facebook and Google, have built out real-time advertising capabilities, too.

Twitter is expected to capture 9 percent of worldwide social-media advertising spending this year, compared with Facebook’s 65 percent, according to EMarketer.

- (Reuters/Bloomberg)