As analysts expected, Twitter reported less than solid fourth-quarter earnings on Thursday.
Missing analysts’ estimates, the struggling social network saw revenue increase by just 1% to $717 million year-over-year. Using the vaguest of terms to describe Twitter’s recent performance, CEO Jack Dorsey said 2016 had been “transformative,” in a statement.
Twitter’s adjusted earnings of 16 cents a share bested forecasts for the period, but that wasn’t enough to offset sagging user grown. For the fourth quarter, monthly active users were up just 4% to 319 million year-over-year.
Worse yet, ad revenue totaled $638 million, during the period -- down slightly year-over-year.
As a result, Twitter’s stock was down by more than 12% on Thursday afternoon. Analysts didn’t hide their disappointment with the once high-flying company.
“Current quarter results were weaker-than-expected, with a big negative from what guidance implies about the coming quarter and the year,” Pivotal Research Group analyst Brian Wieser said in an investor note. “We are altering our long-term forecasts on the company and reducing our price target from $17 to $15 on a [year ending 2017] basis,” he said.
How does Dorsey plan to turn things around?
“While revenue growth continues to lag audience growth, we are applying the same focused approach that drove audience growth to our revenue product portfolio, focusing on our strengths and the real-time nature of our service,” the second-time CEO stated on Thursday. “This will take time, but we're moving fast to show results."
During the quarter, mobile advertising revenue was 89% of total ad revenue. Data licensing and other revenue totaled $79 million -- an increase of 14%, year-over-year. Domestic revenue totaled $440 million -- a decrease of 5% year-over-year. International revenue totaled $277 million, which represented an increase of 12% year-over-year.
Total ad engagements were up 151% year-over-year.
Looking ahead to the first quarter of 2017, Twitter is expecting adjusted earnings somewhere between $75 million and $95 million.
“Revenue growth will continue to lag audience growth due to the sales cycle. It could be further impacted by the escalating competition for digital advertising spending and our efforts to re-evaluate our revenue product feature portfolio,” Anthony Noto, Twitter's COO said in a statement.
“We will continue to increase the value we provide advertisers by simplifying and differentiating the portfolio and improving the engagement and measurement of our products,” Noto promised.
Company watchers are not holding their breath.
“Twitter is losing traction fast,” Debra Aho Williamson, principal analyst at eMarketer, said in a recent note. “It is starting to shed once-promising products, such as Vine, and sell off parts of its business, such as its Fabric app development platform.”
“At the same time, some surveys indicate that Twitter is becoming less integral to advertisers’ spending plans,” Williamson added. “That doesn’t bode well for future ad revenue growth.”
As a result, eMarketer expects Twitter’s share of total worldwide digital ad spending to shrink slightly to 1.1%, this year, while its share of the worldwide mobile ad market will shrink to 1.6%.
Globally, total ad revenue will grow 12% to reach $2.53 billion, while mobile ad revenue will grow 13.5% to reach $2.27 billion this year.