Twitter hits milestone with first-ever profit
Twitter on Thursday reported its first-ever quarterly profit, a key milestone that sent shares soaring at the social network which has lagged for years behind fast-growing rivals.
Twitter shares leapt 18 percent to $31.77 — their highest levels in over a year — as the San Francisco-based firm said it had earned $91 million in the fourth quarter, the first positive net income since going public in 2013.
Revenue was up two percent from a year ago to a better-than-expected $732 million.
The number of monthly active users was 330 million, unchanged from the prior quarter but up four percent from a year earlier.
While Twitter has built a solid core base of celebrities, politicians and journalists, it has failed to match the broader appeal of Facebook and other social platforms, hurting its ability to bring in ad revenues.
Profitability is an important achievement for Twitter, which has lost money consistently since its public offering, sparking speculation on whether it needed to sell itself to keep operating.
Chief executive Jack Dorsey welcomed “a strong finish to the year,” and added “I’m proud of the steady progress we made in 2017, and confident in our path ahead.”
The network has stepped up efforts to boost its user base and engagement, adding streaming video partnerships, doubling the character limit on tweets to 280 and making it easier to create “tweetstorms” by stringing messaging together.
Dorsey told a conference call that by relaxing the limits, “it minimizes some of the complexities” of using the platform and added, “more importantly it is enabling people to be more expressive about what’s on their minds.”
Debra Aho Williamson of the research firm eMarketer said “this was the quarter Twitter needed to prove itself to investors.”
“It’s too early to say whether they’ve turned a corner but they have certainly gotten off to a good start with the fourth quarter results,” she added, noting that the results still highlight sluggish user growth, a decline in US users possibly linked to a push to remove automated accounts or “bots.”
– ‘Staying power’ –
Twitter’s monthly user base of 330 million is far behind the two billion of Facebook, but Twitter said its daily active user base — for which it has not offered a specific number — grew in double digits.
Both Twitter and Facebook have stepped up efforts to crack down on “bots” and other efforts to manipulate their platforms to deflect criticism from lawmakers and others concerned about the spread of disinformation.
“We are committed to making Twitter safer, and we are clarifying our policies, improving our enforcement, and communicating more clearly,” the company said in a tweet.
Earlier this month, BTIG Research analyst Richard Greenfield raised his outlook for Twitter, saying that “management has refocused the company on its core product (and) pushed their product team to iterate far faster than ever before in the company’s history.”
Greenfield said Twitter’s use of artificial intelligence had “made the Twitter user experience more compelling by showing consumers the tweets they care most.”
Jennifer Grygiel, a Syracuse University communications professor who follows social media, called the fourth quarter results an important milestone for Twitter.
“It shows that Twitter has staying power,” Grygiel said. “A lot of people have had doubts for several years.”
Despite Twitter’s problems these past few years, “it is unlike any other social media platform,” Grygiel said.
“It really is the fastest newswire service we’ve ever seen,” she said. “Influencers and news junkies come to Twitter because of that microblogging function that we don’t see in other places.”
But Brian Wieser of Pivotal Research remained cautious, saying the sharp rebound in shares may be an overreaction.
“We don’t think Twitter’s appeal will break out of its niche status any time soon,” Wieser said in a note to clients.
“This severely limits its revenue potential, as Facebook and Google will continue to capture the bulk of the growth in spending for digital advertising.”