Twitter’s sales forecast falls short amid tepid user growth

SAN FRANCSICO • Twitter Inc gave a lacklustre firstquarter (1Q) sales forecast and reported tepid user growth, suggesting changes to improve the social-media platform haven’t yet attracted a much wider audience.

Revenue will be US$715 million to US$775 million (RM3.16 billion) in the period, the San Francisco-based company said yesterday in a statement.

Analysts, on average, projected US$766.1 million, according to data compiled by Bloomberg. The shares slid about 7% in early trading.

Twitter has been ramping up efforts to reduce abuse on its platform and root out fake accounts and election malfeasance, issues that have crimped user growth in a competitive digital-advertising market.

The company’s share of the lucrative market is expected to decline this year as rivals like Facebook Inc and Alphabet Inc’s Google boost their dominance, according to EMarketer.

Daily users rose 9% in 4Q to 126 million, a number Twitter is reporting for the first time — and one investors have been asking for as a better gauge of the service’s popularity.

The growth rate was also 9% in 3Q and had jumped 12% in 4Q of 2017, the company said.

Monthly active users averaged 321 million, decreasing by nine million from the same period a year earlier and down five million from 3Q.

Twitter told investors last quarter that the metric would likely continue to drop as the company cleans up the platform to remove spam and suspicious accounts. The company said it would no longer report the number of monthly active users after 1Q.

Twitter has said it identified much less manipulation on its service during the 2018 US mid-term elections from badfaith actors located abroad than two years earlier during the presidential campaign. However, the firm disclosed in a recent report that it found operations to mislead users on the platform that were potentially connected to sources in Iran, Venezuela and Russia.

Despite its lacklustre user growth, Twitter’s financial health improved after years of losses. The company in 2018 marked its first full year of profitability under generally accepted accounted principles.

The company’s shares increased 35% in the past 12 months through Wednesday’s close, as investors grew optimistic about Twitter’s ability to attract more advertisers to the service, which has benefitted from new formats like video.

The results prove “our longterm strategy is working”, CEO Jack Dorsey said in the statement. “We enter this year confident that we will continue to deliver strong performance by focusing on making Twitter a healthier and more conversational service.”

Fourth-quarter sales increased 24% to US$908.8 million, beating analysts’ average estimate of US$867.1 million. Profit, excluding some costs, was 31 cents a share, compared to the average estimate of 25 cents. Twitter said costs grew primarily because of hiring and expenses related to video content and infrastructure.

Twitter said its calculation of daily active users captures “monetiseable” users, which aren’t comparable to current participation numbers from other social-media companies that include people who don’t see advertisements. For comparison, Snap Inc said 186 million people used the Snapchat app daily in 4Q. On Facebook, daily active users averaged 1.52 billion in December.

Twitter is a small part of the digital advertising market that’s dominated by Facebook and Google. Its share of total worldwide digital ad spending is estimated to drop to 0.8% in 2019 from 0.9% in 2018, according to EMarketer.

The company increased global headcount by 16% in 2018, ending the year with more than 3,900 employees. — Bloomberg