Twitter shares fall as Trump effect fails to boost revenue
Twitter shares fell yesterday after it disappointed investors with financial results which revealed that it has more active users than the previous year, but lower advertising revenue.
Its failure to translate fans such as US President Donald Trump into more dollars saw investors punish the company's shares, which fell 11.7pc to $16.53 (€15.5) in morning trading
Advertising revenue in the fourth quarter declined 0.5pc year-over-year to $638m (€598m), Twitter said, adding that advertising revenue growth would continue to lag user growth during 2017.
Total revenue grew just 1.0pc to $717.2m (€672m), missing analysts' average estimate of $740.1m (€694m), according to Thomson Reuters.
That was the slowest quarterly revenue growth since Twitter went public in 2013, reflecting intense competition from rival social networks such as Snap's Snapchat and Facebook.
"There isn't a growth story here," said Michael Pachter, a Wedbush Securities analyst.
"They have to convince advertisers that they will reach an expanding audience, or they will have trouble competing for new revenue dollars," he said.
Twitter chief executive Jack Dorsey asked for patience, telling analysts on a conference call that the company was investing in machine learning and searching for ways to engage advertisers. "It will take time to show the results we all want to see, and we're moving forward aggressively. The whole world is watching Twitter," he said.
The user base increased 4pc in the fourth quarter to 319 million average monthly active users, Twitter said. Analysts on average had expected 319.6 million, according to market research firm FactSet StreetAccount.
The company sees strong user growth continuing, Dorsey said.
Former Microsoft chief executive Steve Ballmer, an investor in Twitter, said the company has to make more progress but that he likes what he is hearing from Dorsey.
"There's a very valuable service that Twitter builds, and I have confidence in it," Ballmer said on CNBC.
Twitter's fourth quarter included the US presidential election in November, when Trump used Twitter to bypass traditional media and air his views to 24.3 million Twitter followers. The benefit to the company though was not readily apparent, Pachter said.
"The shocking part is that the Trump effect was zero. Their growth actually slowed during the quarter," he said.
Chief operating officer Anthony Noto told analysts that Trump had broadened awareness of how the platform can be used, but that Twitter cannot rely on him alone.
"The magnitude of the impressions of the platform is so large it would be very hard for an event or single person to drive sustained growth," Noto said.
Twitter was abuzz with takeover chatter last year but speculation of offers from big names such as Salesforce.com and Walt Disney failed to translate into concrete offers. (Reuters)