Is Twitter slowly dying?
On Thursday, Twitter reported its earnings for Q4 2016, and the results have raised questions about the company's long-term future.
On Thursday, Twitter reported its earnings for Q4 2016, and the results have raised questions about the company's long-term future.
On Thursday, Twitter reported its earnings for Q4 2016, and the results have raised questions about the company’s long-term future.
Twitter generated $717 million in revenue in the quarter, missing analysts’ expectations, and guided for $75 million to $95 million of EBITDA in Q1 2017, far short of the $191.3 million Wall Street expected.
But that wasn’t the full extent of the ugliness. In Q4, Twitter reported 319 million monthly active users (MAUs), a not-so-huge 4% increase from a year prior and a paltry 2 million gain from the previous quarter. And most disturbingly, year-over-year, the company’s advertising sales, its biggest source of revenue, declined 1% globally and 5% in the U.S.
Twitter did report that its daily active users (DAUs) grew by 11% year-over-year in Q4, but there’s a catch: the company won’t actually release the number of DAUs. “Growth rate is what we are most comfortable sharing at this moment in time,” Twitter CFO Anthony Noto told investors.
All told, despite the fact that Twitter says that 2016 was a “transformative year,” the numbers suggest that Twitter is losing ground to competitors, namely Facebook, Instagram and Snapchat.
Facebook continues to grow like a weed, both in terms of users and revenue, as does Instagram, which Facebook owns. And while Snapchat’s IPO filing has raised some questions about reported losses, it is estimated to have passed Twitter in daily usage months ago.
Twitter claims that it has “[reversed] declining audience trends and [re-accelerated] usage” and highlighted that ad engagements have increased by 151% year-over-year. But near-stagnation in MAUs, the hesitation to release DAU figures and a decline in ad revenue paints a not-so-optimistic picture of Twitter’s current state and raise questions about its future prospects.
Q4 is typically a strong quarter for companies that sell digital ads due to holiday spending, and Twitter found itself in the spotlight during the U.S. presidential election thanks to Donald Trump’s prolific and controversial use of its service. Noto pointed to Trump as an example of Twitter’s utility, stating:
“I would say is that the President’s use of Twitter has broadened the awareness of how the platform can be used, and it shows the power of Twitter. When he tweets, it sparks conversation and discussion. So at a macro level, discussions on a platform really helps us be the best at showing what’s happening in the world and where discussion strengthens our key differentiators and comprehensiveness fast.”
Even with Trump, however, Noto says that “the primary driver of our growth was…product changes and marketing.” Those product changes have included the application of an algorithm to determine what users see in their timeline, as well as new offerings such as live streaming of Thursday night National Football League games.
Unfortunately, Twitter’s slow growth in MAUs and decrease in ad revenue suggests that the company is going to have to do a lot more to turn its ship around, and given the rapid growth of Twitter’s competitors, it’s not clear how much longer Twitter will have before it becomes too late. While Twitter isn’t going to disappear overnight, absent major changes, the future looks quite uncertain.