Twitter shares plunged by nearly 12% yesterday after the social media giant reported a yearly increase in active users but lower advertising revenue.
The news disappointed investors with its failure so far to translate fans such as US president Donald Trump into more dollars.
Advertising revenue in the fourth quarter declined 0.5% to $638m (€598m), Twitter said, and the company said that advertising revenue growth would continue to lag user growth during 2017.
Total revenue increased 1% to $717.2m, missing analysts’ average estimates of $740.1m. That was the slowest quarterly revenue growth since Twitter went public in 2013, reflecting intense competition from rival social networks such as 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.”
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,” he said.
The user base increased 4% in the fourth quarter to 319m average monthly active users, Twitter said.
Analysts, on average, had expected 319.6m. The company sees strong user growth continuing, said Mr Dorsey. Former Microsoft Corp chief executive Steve Ballmer, an investor in Twitter, said that the company has to make more progress but that he likes what he is hearing from Mr Dorsey.
The fourth quarter included the US presidential election, when Donald Trump used Twitter to bypass traditional media and air his views to 24.3m Twitter followers. The benefit to the company though was not readily apparent, said Mr Pachter.
“The shocking part is that the Trump effect was zero. Their growth actually slowed during the quarter,” he said.
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