Twitter Forecasts Rocky Q4

Twitter’s growth prospects have never looked less bright, the social giant revealed during its third-quarter earnings report on Tuesday.

During the quarter, total average Monthly Active Users (MAUs) reached 320 million, which represented a minor gain compared to the 316 million MAUs recorded during the previous quarter. Quarter-over-quarter, MAUs were virtually unchanged -- 304 million to 307 million -- after excluding “SMS Fast Followers,” or those who subscriber to Twitter through text message.



Worse yet, Twitter said it expects fourth-quarter revenue to reach between $695 million and $710 million, which is considerably lower than analysts’ estimates of nearly $740 million.

Anthony Noto, Twitter’s CFO, blamed the forecast on decreasing demand among advertisers. We are “seeing less growth in advertisers than we have in the past,” Noto told analysts on an earnings call on Tuesday. 

While demand is declining, Twitter is betting that it can attract bigger ad budgets with what it believes are superior ad products, according to Adam Bain, Twitter’s recently promoted COO.

“Money is starting to move over into higher-performing [properties] like Twitter,” Bain told analysts, on Tuesday. During the third quarter, Twitter said revenue rose 58% to $569 million -- up from $361 million a year ago and better than earlier estimates.  

Also of note, Twitter said mobile advertising revenue represented 86% of total ad revenue during the period.

Clearly a company in transition, Twitter’s board recently renamed co-founder Jack Dorsey as CEO, announced plans to cut up to 336 staffers, and named Omid Kordestani -- formerly Google’s chief business officer -- as its new executive chairman.

As he has said himself, Dorsey’s mission is to focus Twitter’s offerings and reach a broader audience.

To that end, Twitter recently debuted a new Moments service, which surfaces timely content in clearly defined blocks. Formerly named Project Lightning, Moments is squarely aimed at the millions of consumers who have yet to embrace Twitter in its current -- and what many call confusing -- form.

Moments is “just the start of bolder simplification efforts,” Dorsey told analysts on Tuesday. Indeed, “there are “many, many more to come over the year,” he said. “Twitter’s getting easier to use every single week,” Dorsey insisted.

The dim outlook follows recent research showing that sexier social networks are eating Twitter’s lunch. By 2017, Instagram is on track to overtake Twitter for the first time in terms of popularity among marketers, according to a recent forecast from eMarketer.

The number of U.S. companies using Twitter for marketing purposes will continue to grow, but penetration will increase by just 1.4 percentage points between this year and 2017, eMarketer expects.


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