Dorsey has work cut out as Twitter growth slows

Written by on October 28, 2015 in News with 0 Comments
A portrait of the Twitter logo in Ventura, California December 21, 2013. REUTERS/Eric Thayer

A portrait of the Twitter logo in Ventura, California December 21, 2013. REUTERS/Eric Thayer

SAN FRANCISCO (Reuters) – Twitter Inc gave a disappointing revenue forecast and reported slower user growth than expected, pushing shares of the microblogging company down about 13 percent.

The forecast, which came even as Twitter beat third-quarter profit and revenue estimates, suggested that more time is needed for a turnaround as social media competition grows from the likes of Facebook Inc’s Instagram and Messenger apps.

Twitter on Tuesday forecast fourth-quarter revenue of $695 million and $710 million, well below analysts’ average estimate of $739.7 million according to Thomson Reuters I/B/E/S.

Executives on a conference call gave no reason for lowering the forecast. But analysts said it could be due to anemic user growth and Instagram’s advertising share growth after opening up its platform to all advertisers in September.

Twitter had 320 million average active monthly users in the third quarter, up from 316 million in the prior quarter, missing analysts’ expectations of 324 million.

This is Twitter’s first earnings report since Jack Dorsey returned in early October as its permanent chief executive. As interim CEO in the prior quarter, he delivered a downbeat view of Twitter’s earnings and criticized its product lineup.

“People that were making a huge bet on Dorsey shaking things up within five months of being there may be disappointed,” said PureFunds CEO Andrew Chanin, a Twitter shareholder. “With a company like Twitter, there’s a huge risk to making any big changes.”

Executives said savings from staff cuts would be invested in top priority products that they did not identify.

“We’re still hiring and investing in talent in ways that specifically serve our priorities,” Dorsey said on the conference call after the earnings report from the company he co-founded in 2006.

“We’re also looking at some more bold rethinking and some more bold experiences that really speak to some patterns that we’ve seen on Twitter from Day One.”

Since early October, Dorsey has launched Moments, which showcases Twitter’s best tweets and content; laid off more than 300 employees; given back a third of his stock, about 1 percent, to employees; and hired former Google Inc executive Omid Kordestani as executive chairman.

Dorsey served briefly as Twitter’s CEO in 2008 before he was ousted.

Video advertising helped push up advertising sales, Chief Operating Officer Adam Bain said. Twitter surpassed 100,000 active advertisers in the third quarter and began making money from logged out users, or those without accounts who visit the site, he noted.

Twitter executives spent much of the call touting Moments, which they said has made the website easier to use. But they did not say whether that has helped drive user growth or engagement.

Twitter will air its first TV commercial during the World Series on Tuesday night.

In the second quarter, Twitter’s number of monthly average users grew at the slowest pace since it went public in 2013.

Revenue rose 57.6 percent to $569.2 million in the quarter.

Net loss narrowed to $131.7 million, or 20 cents per share, in the quarter ended Sept. 30 from $175.5 million, or 29 cents per share, a year earlier.

Excluding items, it earned 10 cents per share.

Analysts had expected a profit of 5 cents per share on revenue of $559.4 million, according to Thomson Reuters I/B/E/S.

Twitter shares fell to $27.38 in extended trading after closing at $31.34 on the New York Stock Exchange.

(Reporting by Yasmeen Abutaleb; Additional reporting by Lehar Maan in Bengalore; Editing by Anil D’Silva, Stephen R. Trousdale and Richard Chang)

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