Twit­ter en­ters new ter­ri­tory as fo­cus on cost-cut­ting puts it in the black


Twit­ter has re­ported its first prof­itable quar­ter as a pub­licly traded com­pany, cut­ting into ex­penses while break­ing a streak of de­clin­ing rev­enue, though chal­lenges re­main as the com­pany plans to ramp up spend­ing this year.

Twit­ter, which lost money ev­ery quar­ter since go­ing pub­lic in Novem­ber 2013, had set a goal of “driv­ing to­wards” prof­itabil­ity in 2017. In the fi­nal three months of the year, it eked out a profit of $US91.1 mil­lion, com­pared with a loss of $US167.1m a year ago.

The move into the black came largely from a 28 per cent drop in ex­penses in the quar­ter, driven by lower stock-based com­pen­sa­tion. Rev­enue rose 2 per cent to $US731.6m, end­ing a three-quar­ter string of de­clines, though rev­enue in the US was down 8 per cent. Rev­enue gen­er­ated from ad­ver­tis­ing was up 1 per cent.

In­vestors wel­comed the news, send­ing Twit­ter’s shares up 18 per cent. Wall Street ear­lier this week also cheered a sur­pris­ingly strong per­for­mance from Snap, which man­aged a re­vival in sales growth and user growth for the first time as a pub­licly traded com­pany.

“Twit­ter has done a very nice job get­ting their costs in line with their rev­enue out­look,” said Michael Nathanson, se­nior re­search an­a­lyst at re­search firm Mof­fet­tNathanson.

On a call with an­a­lysts, chief ex­ec­u­tive Jack Dorsey cau­tioned that Twit­ter planned to in­vest in its prod­uct and its sales team in 2018, a move it said would cause ex­penses to more closely align with rev­enue and tamp down on growth in mar­gins af­ter years of im­prove­ment.

The in­vest­ments are partly aimed at more ag­gres­sively curb­ing abu­sive ac­tiv­ity — shed­ding spam and other ac­counts, while stop­ping some be­fore they are cre­ated — an ef­fort that kept its num­ber of users who use the prod­uct monthly at 330 mil­lion in the fourth quar­ter, flat com­pared with the prior three months. From a year ago, monthly ac­tive users were up 4 per cent.

“What re­ally mat­ters for Twit­ter is how well they are mon­etis­ing the ex­ist­ing user base,” said Brian Wieser, se­nior an­a­lyst at Piv­otal Re­search Group. “Plus or mi­nus a rel­a­tively small num­ber of users is mean­ing­less.”

Twit­ter said the num­ber of peo­ple us­ing its prod­uct daily grew 12 per cent from a year ago. On the call, fi­nance chief Ned Se­gal said per­cent­age growth was up dou­ble- dig­its for a fifth con­sec­u­tive quar­ter, but the com­pany again didn’t dis­close its num­ber of daily users — a met­ric given by ri­vals Face­book and Snap — mak­ing it dif­fi­cult to gauge the true strength of the growth.

Early last year, Twit­ter’s user growth ap­peared to turn a cor­ner: In just one quar­ter, nine mil­lion peo­ple joined, a level of user growth the com­pany had not had in two years, but three months later that elec­tion-fu­elled surge fiz­zled.

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