Twit­ter trou­bles deepen as lack of user threat­ens growth

The Pak Banker - - COMPANIES/BOSS -

Twit­ter Inc. added no new users in the fourth quar­ter, con­firm­ing the fears of ad­ver­tis­ers and in­vestors alike: the so­cial­me­dia site is in real trou­ble.

The com­pany has faced sharp crit­i­cism over slow­ing growth in its au­di­ence since its 2013 ini­tial pub­lic of­fer­ing. Even as Chief Ex­ec­u­tive Of­fi­cer Jack Dorsey rolled out ef­forts to make its prod­uct more main­stream, by some mea­sures Twit­ter's user base shrank from the third quar­ter.

Twit­ter tried to di­vert Wall Street an­a­lysts' at­ten­tion by list­ing rea­sons to be­lieve in its fu­ture, in­clud­ing a stronger fo­cus on live events and video, sev­eral com­ing tweaks to the prod­uct that it says will ben­e­fit ad­ver­tis­ers, and a vow to ag­gres­sively hire good board mem­bers and en­gi­neers. Still, a dis­ap­point­ing firstquar­ter rev­enue fore­cast in­di­cates the lack of user growth is also hurt­ing its abil­ity to draw in more ad dol­lars, threat­en­ing its core busi­ness.

"This is the crit­i­cal pe­riod for Twit­ter, and they need to show more than just op­ti­mism," said Rob San­der­son, an an­a­lyst at MKM Part­ners LLC. "It's very vul­ner­a­ble right now, and es­pe­cially if we are head­ing into a re­ces­sion­ary en­vi­ron­ment, those ad dol­lars are go­ing to be­come more dif­fi­cult to get -- for ev­ery­body."

Monthly ac­tive users were 320 mil­lion in the last three months of the year - - the same num­ber the com­pany re­ported in the third quar­ter -- while an­a­lysts on av­er­age had es­ti­mated 324 mil­lion. Twit­ter said it will stop in­clud­ing users on older, non- smart­phone mo­bile devices in its over­all count. With­out th­ese so- called SMS fast fol­low­ers, Twit­ter's user base fell from the third quar­ter, to 305 mil­lion from 307 mil­lion, though the com­pany said since the fourth quar­ter ended it has al­ready re­couped those user losses.

Rev­enue in the first quar­ter will be $595 mil­lion to $610 mil­lion, the San Fran­cisco-based so­cial net­work said Wed­nes­day in a state­ment. That com­pared with an av­er­age an­a­lyst pro­jec­tion of $627.6 mil­lion, ac­cord­ing to data com­piled by Bloomberg.

Twit­ter shares have dropped 35 per­cent this year amid deep­en­ing skep­ti­cism about the com­pany's turn­around ef­forts un­der Dorsey, a co-founder who re­turned as CEO. Dorsey, who started his ten­ure in Oc­to­ber with staff cuts and the ap­point­ment of a new chair­man, has been ral­ly­ing his teams to make the site more ac­ces­si­ble and use­ful for fol­low­ing news sto­ries and live events. On Wed­nes­day he out­lined his five pri­or­i­ties: mak­ing the main prod­uct eas­ier to use, in­vest­ing in live stream­ing video, giv­ing cre­ators and in­flu­encers bet­ter tools, in­vest­ing in mak­ing Twit­ter safer, and sup­port­ing de­vel­op­ers.

Dorsey's bullish­ness wasn't enough to boost the shares, which have de­clined 68 per­cent in the past year, in ex­tended trad­ing. The stock fell about 3.3 per­cent, af­ter slid­ing as much as 14 per­cent im­me­di­ately af­ter the fourth-quar­ter earn­ings re­port. They rose 4 per­cent to $14.98 at the close in New York. In the fourth quar­ter, sales rose 48 per­cent to $710.5 mil­lion, in line with an­a­lysts' pre­dic­tions. Ex­clud­ing cer­tain costs, fourth-quar­ter profit was 16 cents a share, com­pared with an av­er­age an­a­lyst es­ti­mate of 12 cents. The com­pany's net loss nar­rowed to $90.2 mil­lion, or 13 cents, Twit­ter said in the state­ment.

Twit­ter ap­pointed Dorsey as per­ma­nent CEO in Oc­to­ber af­ter a search to re­place Dick Cos­tolo, who re­signed amid pres­sure from Wall Street over slow­ing growth. Dorsey, who also runs pay­ments com­pany Square Inc., has been push­ing the staff to change even the aspects of Twit­ter's site that seem un­touch­able. For ex­am­ple, Twit­ter has con­sid­ered lift­ing a 140-char­ac­ter limit in posts, which has been the for­mat since the com­pany started. The com­pany said Wed­nes­day it will also change the ".@" struc­ture for replies on the site. Ear­lier in the day, Twit­ter said it would start dis­play­ing more pop­u­lar tweets at the top of a user's feed, in­stead of keep­ing them in the com­pany's tra­di­tional re­verse-chrono­log­i­cal stream.

"They def­i­nitely needed to do some­thing in or­der to boost new user growth," said Orli LeWin­ter, vice pres­i­dent of strat­egy and so­cial mar­ket­ing at dig­i­tal mar­ket­ing agency 360i. "Hope­fully this is it." The year will in­clude many more "sig­nif­i­cant changes" for the prod­uct, Twit­ter said.

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