Turning headlines into cash the white whale for Twitter
Twitter may be the megaphone for the leader of the free world, but the company’s headline omnipresence has yet to turn into a long-sought-after pot of gold for the company.
In the near term at least, it appears that is the way it will remain.
A lean profit outlook sent shares of Twitter Inc. plunging nine per cent at the opening bell Thursday.
Donald Trump has used Twitter like no other world leader, firing out broadsides and accolades in rapid succession, generating headline after headline with 140-character missives.
The response on Twitter has exploded, but that has not done anything to pump up profit numbers for the San Francisco company and growth, as it has been for years, remains elusive.
The social media website expects between $75 million and $95 million in adjusted earnings this quarter before interest, taxes, depreciation and amortization. That’s a far cry from the $191 million that Wall Street had been expecting, according to a survey of industry analysts by FactSet, and investors scrambled to get out of the way of the falling stock even before markets opened.
Its growth is a shadow of rivals Facebook, Snapchat and Instagram. Revenue growth has been stalled for more than two years and the company is cutting costs and shuffling executives.
“2016 was a transformative year as we reset and focused on why people use Twitter: It’s the fastest way to see what’s happening and what everyone’s talking about,” said CEO Jack Dorsey, who rejoined the company in late 2015 with hopes of reviving it.
For the quarter ended Dec. 31, Twitter had 319 million active users, up four per cent from a year ago. Facebook has about 1.86 billion monthly active users.
Trump’s election has created a more active landscape for Twitter. Average daily active usage rose 11 per cent compared with the same time last year, which Twitter can point out to advertisers.
In a charged political and social environment, the company is balancing its position as a platform for free speech while curtailing hate speech and bullying.
This week, the company announced three additional measures to control rogue users, including identifying past abusers and banning them from using new Twitter handles.
But reversing profit trends is what matters on Wall Street, and the company took a beating Thursday.
Losses for Twitter Inc. swelled to $167 million in the fourth quarter, from $90.2 million in the previous year’s quarter, as revenue inched up one per cent to $717.2 million.
Per-share earnings of 16 cents in the quarter, was 4 cents better than expected, but that was overshadowed by its outlook.
Advertising revenue fell slightly to $638 million in the fourth quarter, and the company said tough competition and Twitter’s push to re-evaluate its product portfolio could affect future revenue growth.
Twitter didn’t offer a revenue forecast for the first quarter, but said it expected advertising sales growth to continue to lag audience growth in 2017.
Live video is another selling point that Twitter is trying to drive home because of the potential ad dollars. The company said it streamed more than 600 hours of live premium video from sports, news and entertainment events during the quarter, drawing 31 million unique visitors.
Analyst Colin Sebastian said there were some green shoots in user engagement, and he called video a silver lining.
Shares of Twitter plunged more than 12 per cent, or $2.31, to close Thursday at $16.41.