Twitter misses mark for Q2
Social media company reports sales of $602 million, falling short of analysts’ expectations
SAN FRANCISCO — Competition for ad dollars has heated up among social media companies and Twitter is falling behind.
On Tuesday, the company’s stock tumbled more than 11 percent to $16.40 per share in after-hours trading after it reported second-quarter sales that missed Wall Street’s expectations. Twitter’s forecast for third-quarter revenue was also lower than expected.
“There was a time not too long ago where you could say that Twitter’s got a usage problem but it doesn’t have an advertising problem,” said Debra Aho Williamson, an analyst with eMarketer. “I don’t think you can say that anymore.”
From April to June, the company raked in $602 million in sales, which is lower than the $607 million that analysts surveyed by Thomson Reuters predicted. Still, revenue in the second quarter increased by about 20 percent compared to the same period last year.
Twitter, which makes most of its money from mobile ads, estimated that revenue in the third quarter will be between $590 to $610 million, below the $678.18 million that analysts expected.
“There certainly is increased competition for social marketing budgets and we are effectively priced at a premium in terms of (cost-per-engagement),” said Adam Bain, Twitter’s chief operating officer, in a conference call. “We’re doing a bunch of work to help bring both prices down and improve (return on investment) for those advertisers.”
Twitter’s earnings were better than expected, even though it lost $107 million in the second quarter. The company posted a loss of 15 cents per share, which was better than the loss of 17 cents per share expected. Excluding certain expenses, Twitter earned 13 cents per share, higher than the estimates of 10 cents per share.
Twitter now has 313 million monthly active users, up from 310 million in the previous quarter. Most of the growth, which the company attributed to product changes and marketing, came from international users.
The tech firm’s quarterly earnings come about a year after Twitter co-founder Jack Dorsey returned to run the struggling social media company. Dorsey, who also leads mobile payment company Square, stepped in as Twitter’s interim CEO in July 2015 and accepted the permanent job in October.
Since then, the social media company has faced layoffs and a number of executive departures, but it also has made product changes and hired new employees. Competing with Facebook and other tech firms, Twitter has been ramping up its live video efforts and partnered with various sports leagues and media outlets to broadcast games and coverage of major events. It’s also made small tweaks to the website’s 140-character limit and timeline along with releasing a new feature called “Moments” aimed at making it easier to follow events.
The company, which has been criticized in the past for failing to tell its own story, started rolling out a new marketing campaign this week to show that Twitter is “where you go to see what’s happening everywhere in the world right now.”
“We’re focused right now on what matters most and what we need to fix and we’re seeing really healthy signs that are pointing us in the right direction in terms of what we need to continue to do,” Dorsey said on the call.
Some analysts don’t think these efforts are enough and speculation that another company will purchase Twitter has only heightened following acquisitions of other tech firms such as LinkedIn.
“They’re really trying to make changes for the long term in terms of what Twitter is and how it should be used,” said Williamson. “The question that remains is how long is it going to take?”
“We’re focused right now on what matters most and what we need to fix and we’re seeing really healthy signs that are pointing us in the right direction in terms of what we need to continue to do.”
— Jack Dorsey, Twitter co-founder