Loss-making Twitter struggles amid investor impatience
Analysis: despite its influence the social network has struggled since its IPO in 2013
The challenge for Twitter will be its ability to convince Wall Street it is moving quickly enough to reverse many of the negative trends it has faced for years. Photograph: PA
United States sports fans were glued to it during the Super Bowl. Millions used it to track US election night results. In the morning, the president of the US sends a daily missive in the form of a tweetstorm.
“You don’t go a day without hearing about Twitter,” Jack Dorsey, the company’s chief executive, said on a conference call with investors on Thursday morning. There is just one problem: for all of its influence, Twitter cannot seem to capitalise on its wide reach.
The company reported disappointing earnings on Thursday, with sales totalling $717 million (€672 million) in the fourth quarter, up only about 1 per cent compared with a year ago. That fell far short of analysts’ expectations of $740 million. Twitter lost roughly $167 million over that period, or 23 cents per share, from a loss of about $90 million in the quarter last year.
The results reflect the service’s struggle since its initial public offering in 2013 to compete with networks such as Facebook, which has much more users and engagement. Twitter, which has long aspired to bring its social network to wider audiences globally, added only two million users in the fourth quarter of 2016, taking its total number to 319 million overall. Facebook, by contrast, added tens of millions, its strongest user growth since it became a public company, and it is closing in on two billion worldwide users.
That difficulty growing Twitter’s user base has finally caught up to its financial performance. The company noted that as it moves to “reset” itself and tries to focus on making its product more attractive to wide audiences, revenue growth will slow and may continue to do so in the future.
Shares of Twitter fell to $16.81 in New York, down 10 per cent, erasing gains made this month. Part of Twitter’s problems are Facebook and Google, the giant gorillas that dominate digital advertising. Over the first half of 2016, marketers spent some $5.7 billion on Facebook advertising alone in the US, which represented 43 percent of digital advertising growth domestically, according to estimates from the Interactive Advertising Bureau.
As a result, Twitter is going back to figure out the different types of ads it can offer advertisers. Some of those may be focused on the company’s live video products, an effort borne out of deals negotiated by Anthony Noto, Twitter’s chief operating officer. Mr Noto said that video advertising was the company’s most valuable ad product for the quarter and that it would be a focus for the future.
Others said they believed that Twitter’s renewed focus on cleaning up problems with abuse of users on its platform, which Mr Dorsey said would be a priority in 2017, might make coming to Twitter more attractive for new users and, importantly, new advertisers.
“They’ve been rolling out many new features and tackling issues such as abuse, all positively received by both users and brands,” said Joshua March, chief executive of Conversocial, a social media customer engagement company. “I think they’ll be seeing more revenue in the future as they become a partner to major brands across the customer life cycle.”
But the challenge for Twitter will be its ability to convince Wall Street it is moving quickly enough to reverse many of the negative trends it has faced for years. Investors have grown impatient with Mr Dorsey, who returned roughly 18 months ago to run the company he founded, and are convinced that Twitter’s leadership may not be doing enough to right the ship.
Twitter’s management team pushed back on those concerns, pointing to the year ahead as an opportunity for growth after a long, painful 2016. The message was simple: trust us. “It may have felt like we weren’t changing much this past year, but those hundreds of little changes added up to more predictable and sustained growth we will now use as a foundation to be more inventive and take bigger risks,” Mr Dorsey said on Thursday morning.
“And that’s exactly what we’re now going to do.”– (New York Times service)