SAN FRANCISCO, CA: Micro-blogging service Twitter yesterday posted its first quarterly profit, amid a decline in US users and a streak of declining revenue. However, value to advertises appears to be increasing.
Since going public in 2013, the company has exemplified the reliance on investor cash that the tech sector is known for. However, this quarter, Twitter reversed that tide with a 28% reduction in expenses in Q4. Its profit in the final three months reached $91.1 million, compared with a loss of $167m the previous quarter.
In addition, total revenue increased by 2% following three straight quarters of decline. Much of this was driven by international increases, as its home territory of the US declined 8%.
“The fourth quarter was a strong finish to the year,” CEO Jack Dorsey told investors. “We returned to revenue growth and achieved our goal of GAAP profitability.”
In a letter to shareholders, the company noted the strong performance of its advertising division. “[O]wned-and-operated (O&O) advertising revenue increasing 7% year-over-year, reflecting better-than-expected growth across all major products and geographies.”
Ad engagements were up 75% year over year. At the same time, the cost per engagement dropped by 42% year on year. “[V]alue for advertisers continued to improve”, the company added, “was driven by ongoing engagement growth, improved products, better ad relevance (as measured by clickthrough rates (CTR) and ad engagements), and better pricing.”
Despite improvements on the financial side, Twitter has struggled to increase users, despite the fact that the Trump presidency has placed the platform at the heart of national debate in the US.
The platform drew 330 million monthly active users in the quarter, constituting a 4% YOY increase, but this fell below Wall Street’s 332.5 million expectation.
In the letter, the company defended this growth, noting that “MAU was impacted by seasonality and the change to Safari’s third-party app integration, which affected approximately 2 million MAU in Q4 (roughly 1 million in the US and 1 million in international markets), as well as increased information quality efforts”.
Analysts, however, had different concerns. “Plus or minus a relatively small number of users is meaningless”, said Brian Wieser, senior analyst at Pivotal Research Group in comments reported by the Wall Street Journal. “What really matters for Twitter is how well they are monetizing the existing user base”.
Sourced from Twitter, Wall Street Journal; additional content by WARC staff