Twitter has impact and influence, but not cash or growth
Twitter's role as a megaphone for the United States president, countless celebrities and businesses hasn't attracted regular people to the service, not in the way Facebook has, or even Instagram and Snapchat.
The San Francisco company's latest earnings report and dismal forecast suggest that this is unlikely to change in the near future. CEO Jack Dorsey acknowledged long ago that Twitter needs to do more to grow its user base and convince people why it is useful.
"The whole world is watching Twitter. While we may not be meeting everyone's growth expectations, there's one thing that continues to grow and outpace our peers: Twitter's influence and impact," Dorsey said in a conference call with analysts on Thursday. "You don't go a day without hearing about Twitter."
But that doesn't amount to much if Twitter can't translate the influence into boosting its user base, advertising and revenue.
While Dorsey and Twitter have taken major steps recently to address some of its users' biggest concerns, including clamping down on hate speech and abuse, this has yet to make a notable difference in drawing new users. For the final three months of 2016, Twitter averaged 319 million monthly users, up just four per cent from a year ago. Facebook has about 1.86 billion.
Meanwhile, Twitter has yet to address other issues, including simple ones such as the ability to edit tweets.
"Just like Myspace, perhaps Twitter does not what to 'change the formula' for fear of losing its unique simple user experience, but the shareholders and CEO Jack Dorsey are running out of time," Mark Skilton, a professor at Warwick Business School, wrote in an email.
A lean profit outlook sent shares of Twitter Inc plunging more than 10 per cent, or US$1.97, to US$16.75 in midday trading Thursday. The social media company expects between $75 million and $95 million in adjusted earnings this quarter before interest, taxes, depreciation and amortisation. That's far less than the $191 million that Wall Street had been expecting, according to FactSet.
Twitter's revenue growth has stalled for more than two years, and the company is cutting costs and shuffling executives. Dorsey, who rejoined the company in late 2015 with hopes of reviving it, called 2016 "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".
Even before he was elected president, Donald Trump has used Twitter like no other world leader, firing out broadsides and accolades in rapid succession and generating headline after headline.
His election has created a more active landscape for Twitter. Average daily active usage rose 11 per cent compared with the same time last year. But Trump's tweets haven't inspired people to sign up for the service en masse. The increased usage is mostly among existing users.
Because of Twitter's public nature, users can see a lot of the content on it without creating an account.
What matters most to Wall Street is making a profit - something Twitter has yet to do in its 11-year existence. Losses for Twitter swelled to US$167 million in the fourth quarter, from US$90.2 million a year earlier, as revenue inched up one per cent to US$717 million. Excluding special items such as expenses for stock compensation, per-share earnings of 16 cents was four 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.
The company didn't offer a revenue forecast for the first quarter, but it said it expected advertising sales growth to continue to lag audience growth in 2017.
There was some silver lining in the numbers: video. The company says it streamed more than 600 hours of live premium video from sports, news and entertainment events during the quarter, drawing 31 million unique visitors. Live video is important for Twitter because of the potential ad dollars.