Twitter reports drop in active monthly users
But fourth-quarter decline was then followed by strong January, service says
Twitter, Inc. on Wednesday reported a drop in active monthly users and issued a revenue outlook below expectations, sending shares lower after hours.
The stock fell as much as12 per cent on top of a more than 30-per-cent decline so far this year, with the weakness fuelled by stagnating growth for the online social networking platform, especially in the U.S.
Shares recovered to trade 1.6-percent lower at $14.74 (U.S.) as the fourth quarter earnings report also showed adjusted profit that topped Wall Street forecasts.
Twitter said active monthly users, excluding those who access the platform exclusively through text messages, fell to 305 million from 307 million in the previous quarter.
Including so-called SMS followers, Twitter reported 320 million users in the fourth quarter, unchanged sequentially but up 9 per cent yearover-year.
Wall Street had expected Twitter to report MAUs excluding SMS followers of about 309 million.
Twitter, however, said growth re- sumed in January due in part to an increase in resurrected users and more retention. It also said it will focus on removing and refining some rules that create confusion for new visitors to the platform and inhibit growth.
“We saw a decline in monthly active usage in Q4, but we’ve already seen January monthly actives bounce back to Q3 levels. We’re confident that, with disciplined execution, this growth trend will continue over time,” the company wrote in a shareholder letter. Twitter also said those lost from the platform in the quarter were “less high quality users.”
CEO Jack Dorsey on an earnings call said a tweak to the Twitter algorithm that allows users to see the best tweets as selected by the company’s software as well as live messages in chronological order has already lifted engagement “across the board.”
The change is seen as attractive to advertisers but has been resisted by Twitter loyalists who value the unique and real time news value of tweets sorted by the latest post.
Dorsey called it part of his effort to refine the core Twitter service “to make everything more intuitive.”
He said creators will be given better tools to connect, developers will be better supported, the company will invest to make Twitter safer and it will focus on live streaming video.
Dorsey said live streams will be used to explain the service and Twitter is going to step up marketing efforts to bring on more logged-out users.
Chief operating officer Adam Bain said the U.S. election and Olympics will help in marketing the platform, even though Twitter saw weaker engagement during the Super Bowl versus last year. Twitter said key engagement metrics such as time spent on the site are trending positively.
Dorsey cited the need for “consolidating some strength,” which could signal pending job cuts at the San Francisco-based social networking company.
The company reported revenue for the quarter of $710 million, an increase of 48 per cent year-over-year and in line with forecasts. Revenue for 2015 reached $2.2 billion, a 58per-cent annual improvement.
Adjusted earnings per share of 16 cents came in four cents ahead of the consensus forecast of analyst.
Twitter reported a net loss of $90.2 million, or 13 cents per share, compared to a loss of $125 million, or a loss of 20 cents per share in the yearearlier period. Twitter issued a first quarter revenue outlook of $595 to $610 million, below the consensus of $633.3 million.
Twitter said the fourth quarter saw “positive impacts from our marketing initiatives which contributed meaningfully to MAU growth; however, these were more than offset by organic declines, partially due to fourth quarter seasonal trends.”
Advertising revenue totalled $641 million, an increase of 48 per over last year. Mobile advertising revenue was 86 per cent of total advertising
Data licensing and other revenue totalled $70 million, an increase of 48 per cent year-over-year. Mobile users represented about 80 per cent of monthly active users.