Trump ma­nia isn’t pay­ing off yet for Twit­ter

Pop­u­lar so­cial me­dia plat­form’s con­tin­ued slow growth has in­vestors con­cerned

The Hamilton Spectator - - BUSINESS - MIKE ISAAC New York Times

Sports fans were glued to it dur­ing the Su­per Bowl. Mil­lions used it to track United States elec­tion night re­sults. In the morn­ing, the pres­i­dent of the United States 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 CEO, said on a con­fer­ence call with in­vestors Thurs­day morn­ing.

There is just one prob­lem: for all of its in­flu­ence, Twit­ter can­not seem to cap­i­tal­ize on its wide reach.

The com­pany re­ported dis­ap­point­ing earn­ings Thurs­day, with sales to­talling $717 mil­lion (all fig­ures US) in the fourth quar­ter, up only about one 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 like Face­book, which has many more users and higher 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.

Part of Twit­ter’s prob­lems are Face­book and Google, the 900pound go­ril­las that dom­i­nate dig­i­tal ad­ver­tis­ing. Over the first half of 2016, mar­keters spent some $5.7 bil­lion on Face­book ad­ver­tis­ing alone in the United States, which rep­re­sented 43 per cent 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 born of deals ne­go­ti­ated by An­thony Noto, Twit­ter’s chief op­er­at­ing of­fi­cer. 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 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, CEO 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 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,” Dorsey said Thurs­day. “And that’s ex­actly what we’re now go­ing to do.”

GETTY IMAGES FILE PHOTO

Twit­ter added only two mil­lion users in the fourth quar­ter of 2016, a pe­riod dur­ing which it lost $167 mil­lion US.

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