Twitter’s user base has been stagnant and its stock has taken a beating for it; shares have fallen 6 percent in the last quarter, closing at an all-time low on February 9 — according to MarketWatch. Despite the disappointing news for stockholders, who had been hoping for an increase in users, Twitter’s ad business performed well. It generated $710 million in revenue, a 48 percent year-over-year increase; revenue would have been 53 percent if excluding impact of foreign exchange rates. Twitter earned 13 cents a share, beating analysts’ estimate of 12 cents. Factoring in expenses, Twitter lost 16 cents a share, shy of the 17 cents analysts predicted.
“Not being able to add any new active users in the last quarter will disappoint some, particularly investors, yet it did see active advertisers go up by almost 90 percent year on year,” says Sotirios Paroutis, an associate professor of Strategic Management at Warwick Business School, at the University of Warwick in the U.K.
While Wall Street may not have liked the news, CEO Jack Dorsey and the executive team tried to sound upbeat during the conference, saying that it had a good Q4, despite the last quarter generally being the weakest. Dorsey says he has spent the past six months developing a stronger point of view of what Twitter is and what it wants to be, and that’s the notion of being “live,” whether it’s live commentary, live conversations, or live connections in breaking news, entertainment, sports, or everyday topics.
“Twitter is always considered a second screen, and we believe we can become the first screen for what’s happening right now,” Dorsey says. “We really want to focus on ‘live’ because it’s the fastest and easiest way to understand Twitter and get into it.”
To strengthen Twitter around “live,” Dorsey says the company will “refine our core service [i.e., timeline]; add live-streaming video and build off success of Periscope; offer best tools for creators; make it safe for people to express themselves; and help developers build and grow their businesses using Twitter. Dorsey acknowledges that Twitter can be confusing, and that there are “broken windows” that inhibit growth and retention (an example is Twitter’s rules in regards to using @username replies in tweets). He also says he wants to improve machine learning and find ways to get people on faster. On the advertising side, Twitter says it will continue to work on offering ways for brands to create more impact, to both logged-in users and those who aren’t.
“This allows Twitter to connect multiple products when single events happen — making Twitter a more appealing option for advertisers,” Paroutis says. “It also allows them to build a distinctive identity versus other social media offerings.”
According to S&P Global Market Intelligence, analysts expected Twitter to generate $709.97 million in revenue, at 12 cents a share, which the company did beat. Before today’s announcement, the company had $3.5 billion in cash and investments; USA Today says that would last Twitter 412 years if it spent only $8.5 million a year, which is what it did in 2015. Despite rumors of imminent death of the platform, Twitter still has legs, however wobbly.
Ahead of the announcement, Twitter introduced new video ads and a new timeline that’s based on popularity of tweets. During the conference call, Twitter executives pointed to these new features as way to increase growth, as they are part of the company’s new commitment in improving its core experience. With the departure of high-profile executives recently, Dorsey said his No. 1 task in 2016 will be to recruit for key positions that could help Twitter drive growth.
