On Thursday, Twitter disclosed lower-than-expected quarterly advertising income and user growth, as well as revenue forecasts that fell short of Wall Street expectations, signalling that the company’s recovery plan has yet to bear fruit.
Nonetheless, the social networking site claimed it achieved “significant progress” toward its goal of 315 million users and $7.5 billion in annual revenue (approximately Rs. 56,560 crore) by the end of 2023, and that user growth in the United States and overseas should accelerate this year.
After the news, shares of the San Francisco-based corporation soared more than 8%, but those gains were quickly erased in morning trading.
To break out of a protracted period of stagnation and attract new users and advertisers, Twitter has been working on large projects such as audio chat rooms and newsletters. However, the quarterly results cast doubt on Twitter’s strategy, as analysts had anticipated faster evidence of growth.
According to IBES data from Refinitiv, monetizable daily active users, or users who view adverts, increased 13% to 217 million in the fourth quarter ended December 31, missing average projections of 218.5 million. This was an increase from the previous quarter’s 211 million users.
Twitter also announced a new $4 billion (approximately Rs. 30,170 crore) share repurchase programme, which will take effect in 2020 and replace a previous $2 billion (about Rs. 15,080 crore) programme.
“Twitter’s stock buyback plan is allowing investors to look past the company’s relatively poor earnings and future,” said Jesse Cohen, senior analyst at Investing.com.
Advertising revenue increased 22% year over year to $1.41 billion (approximately Rs. 10,630 crore), falling short of analysts’ expectations of $1.43 billion (roughly Rs. 10,785 crore).
According to Jasmine Enberg, principal analyst at Insider Intelligence, Twitter gained 6 million users during the quarter, but will need to add over 12 million per quarter for the next two years to reach its target of 315 million users by the end of 2023, which she describes as “an incredibly lofty goal.”
The company’s first quarterly results since Chief Executive Parag Agrawal took over in November. After co-founder Jack Dorsey stepped down as CEO, his appointment suggested a greater emphasis on engineering and the incorporation of cryptocurrencies and blockchain technologies.
During a conference call with analysts, Agrawal stated that he was focused on making faster decisions and “doing less things.”
He remarked, “I see a significant urgency to increase our focus and execution, but also a lot of confidence in our approach and our people.”
Increasing user engagement
The company expects overall revenue of $1.17 billion to $1.27 billion in the first quarter (approximately Rs. 8,820 crore). The range’s midpoint is less than Wall Street’s consensus projection of $1.26 billion (roughly Rs. 9,580 crore).
Chief Financial Officer Ned Segal said in an interview that user growth was in line with Twitter’s guidance in the previous quarter, and that Twitter was working to boost user activity by prompting people to follow topics they are interested in during the sign-up process.
He went on to say that advertising demand was not as robust in the fourth quarter’s final weeks as it had been at the start of the holiday season.
During the quarter, total advertisement engagements, which include clicks, fell by 12%. This was due in part to a shift toward video advertisements and other formats, which have lower user engagement but are more expensive and profitable for Twitter. The cost of each ad engagement increased by 39%.
Apple’s privacy reforms, according to the corporation, had a minor impact. Last year, Apple began requiring apps to receive permission from iOS users to track their activity on apps and websites owned by other companies.
The Apple changes could impact Twitter in the future as it grows its performance advertising business, Segal said, referring to ads that seek to drive sales or other consumer actions. He said Twitter is working to mitigate future negative impacts from Apple’s changes.
“We’re pleased with the progress we’ve made, but we have more work to do here,” he said.
Facebook owner Meta last week blamed the Apple changes for hurting advertisers’ ability to target and measure ads, and said it could have a $10 billion (roughly Rs. 75,405 crore) impact on Meta’s advertising business this year.
Twitter reported that fourth-quarter total revenue, which also includes money earned from data licensing, rose 22 percent to $1.57 billion (roughly Rs. 1,120 crore), in line with analyst estimates.
Full-year 2022 revenue is expected to grow in the low-to-mid-20 percent range. Total cost and expenses for 2022 are expected to grow in the mid-20 percent range versus last year, the company said.