Twitter’s not singing as revenue growth slows to a crawl and misses estimates
Twitter shares are definitely not singing after releasing its fourth quarter earnings, sending shares down as much as nine per cent in pre-market trading.
The figures
Revenue came in at $717m, inching up just one per cent on the same quarter a year earlier – its slowest quarterly growth since going public – while earnings were 16 cents per share.
Earnings were above the 12 cents per share expected by analysts, but revenue fell far short of the $740.1m estimates.
Twitter offered outlook for the year in terms of earnings of between $75m and $95m for the first quarter of 2017, but it did not give revenue estimates.
Ad revenue came in at $638m , slightly down year-on-year.
Why it's interesting
Twitter's well documented woes over the past year or so include a major issue trying to add new users who are often baffled with how the social network works and in the face of rivals such as Snapchat vying for people's time and attention, not to mention the high-profile criticism it attracts over trolling and abuse.
Jack Dorsey's attempts to turn things around have been somewhat slow, failing to get the immediate results many investors have demanded, several top executives have flown the nest in recent months while its attempt at a sale (the likes of Salesforce, Disney and Google had been interested) failed to get off the ground beyond the talks stage.
Monthly active users grew, but only at a modest four per cent year-on-year, and only adding 2m users since the previous quarter – some good news (at least it's not in reverse).
Also offering a ray of sunshine was the fact that those on the platform are more engaged and are spending more time on it: daily active use grew 11 per cent on the same quarter the previous year and accelerated on the seven per cent growth on the third quarter.
"Tweet impressions and time spent on Twitter also remained strong with each increasing by double digits in the fourth quarter on a year-over-year basis," the company said, while advertising engagement was up 151 per cent year-on-year.
It also manages to reduce the amount of cash it spent on stock compensation for the year, down 10 per cent on 2015, now accounting for just under a quarter of revenue. In 2015 that stood at just over a third and in 2014 at 45 per cent.
What Twitter said
“Twitter gives advertisers the ability to reach the most engaged audiences in the right context at the right time, and we’re focusing our investments on revenue products that strengthen our unique value proposition, especially in live and video,” said newly installed chief operating officer Anthony Noto, the former finance chief of the site who replaced Adam Bain.
“We’re hearing positive feedback from our ad partners about our continued acceleration in audience growth and engagement. That said, revenue growth will continue to lag audience growth due to the sales cycle, and could be further impacted by the escalating competition for digital advertising spending and our efforts to re-evaluate our revenue product feature portfolio. We will continue to increase the value we provide advertisers by simplifying and differentiating the portfolio and improving the engagement and measurement of our products. We are confident that this path will return us to long-term revenue growth.”