Fri | Aug 17, 2018

Twitter makes money for first time ever, but problems remain

Published:Friday | February 9, 2018 | 12:00 AM
Twitter CEO Jack Dorsey. (AP)

Twitter made money for the first time in its nearly 12-year history, a milestone that satisfied investors in the short term but might not resolve the company's broader problems any time soon.

The company is still struggling to get people to sign up, despite the attention President Donald Trump's no-holds-barred tweets have drawn to the service.

One problem: Anyone can read tweets without signing up. As a result, Twitter's user base pales compared with Facebook and the Facebook-owned Instagram.

And that means fewer advertising opportunities.

Beyond that, Twitter has been dealing with policing hate speech and abusive comments, fake accounts and attempts by Russian agents to spread misinformation. Every time Twitter tries to respond to a problem, it's either not good enough, or some other problem emerges.

"They are playing whack-a-mole with these problems," said Michael Connor, whose Open Mic group helps investors push tech companies to address privacy, abuse and other issues. "They say they have the problem under control, but they don't know what the problem is exactly."

Add to that a revolving door of executives, including an influential chief operating officer leaving after Thursday's earnings report.

Twitter said it had an average of 330 million monthly active users in the final three months of last year, unchanged from the previous quarter and below Wall Street's estimate of 333 million. By contrast, Facebook has 2.2 billion and Instagram has more than 800 million.

Twitter hadn't turned a profit until now because - competing with Facebook, Google and others for digital ad dollars it didn't attract enough advertising revenue to make up for its expenses. But it's been cutting costs and focusing on new revenue streams, such as live video.

The company grew revenue by 2 per cent to US$732 million in the final three months of 2017. That's above the US$687 million that analysts polled by FactSet were expecting. Its net income - a first - was US$91 million, or 12 cents per share. Adjusted earnings were 19 cents, above analysts' expectations of 14 cents.

After the results came out, the company's stock jumped more than 17 per cent in morning trading to US$31.64, its highest level since 2015.

The quarter "was a breath of fresh air for investors that have patiently awaited for this turnaround story to manifest after years of pain," said Daniel Ives, head of technology research at GBH Insights.

- AP