Twitter’s number of users declines
Twitter’s user growth went from a crawl to a complete stop in the final quarter of 2015, forging a dangerous trajectory for a company whose viability investors are beginning to question.
Not counting SMS Fast Followers — international users who receive tweets via text message — the San Francisco company’s monthly active user base fell from 307 million to 305 million, far below analysts’ projections.
The news fed anxieties over the company’s staying power and its ability to attract users. Shares dropped by as much as 13 percent in after- hours trading Wednesday, before settling with a 4 percent loss.
In a call livestreamed on Twitter’s video service Periscope, CEO and co- founder Jack Dorsey did his best to assure investors that in spite of Twitter’s poor showing in user growth, the company is on the right path.
He summed up its core mission in one word: live.
“Twitter is live — live commentary, live conversations and live connections,” Dorsey said in Wednesday’s earnings call. “Once you see a live event unfold on Twitter, you get a real sense of what it means being in the now, being in the know.”
It was a mission statement as well as a rebuke of the sharp criticism users have hurled at Twitter this week
over a new algorithmic feature that uses curation instead of chronology to organize tweets.
“We need to continue to invest in our core product, and around the timeline specifically,” Dorsey said, hailing the new algorithm as an option that will help nonusers understand Twitter’s value. “I’m coming back to the app thinking, ‘ What did I miss?’ But I also want to get back to live as quickly as possible. … We think there’s a lot of opportunity here.”
Investors have long looked at user growth as a key indicator of Twitter’s vitality. In the previous three quarters, Twitter, which has more 1 billion registered users, saw a modest increase of just 5 million users — not counting those who get tweets sent to their phone via text message.
Chief Financial Officer Anthony Noto pointed to other metrics that he said indicated increased engagement despite a drop in overall users: retweets, direct messages and time spent on Twitter all grew in 2015.
The final quarter of any year has historically been Twitter’s worst, Noto said. He suggested that Twitter is poised to recover users and increase engagement in 2016, and will receive a boost from live traffic-generating events like awards shows, the Olympics and a presidential election.
Analysts questioned this philosophy, noting the number of tweets sent during the Super Bowl, the kind of live event during which Twitter usually thrives, decreased compared with last year. Facebook engagement was also down during the Super Bowl.
An encouraging sign for investors may be in Twitter’s advertising business.
The company reported $ 710 in revenue and a net loss of $ 90 million. That’s a 90 percent growth in revenue compared to the same quarter in 2014 and a reduction in loss by 27 percent — far better than what Wall Street had predicted.
Advertising grew significantly to $ 641 million, an increase of 48 percent compared to the year prior, largely thanks to Twitter’s integration of video and greater adaptation by mobile users.
Executives pointed to Twitter’s new premium advertising option, First View, which launched Tuesday and places a video ad near the top of users’ news feeds.
But investors still had questions about the company’s future, particularly regarding a recent mass exodus of executives.
Dorsey, who is also the CEO of mobile payments company Square, said his main focus for 2016 beyond product development will be on recruiting. He also told analysts that running two companies is not an impediment to his performance at either firm.