Twitter is set on reporting its fourth-quarter revenues on Thursday, and it would have to talk about its slowdown in growth on the same occasion. Wall Street is taking it hard on Twitter, pointing out a turbulent year for the company, which resulted in drastic decrease in new users.
However, Twitter is ready to change that negative perception, by launching a range of innovations: from shooting and editing videos in-house to making direct messaging in groups available.
It has also expanded on the advertisement front, signing deals for selling ads to the app Flipboard and email portal Yahoo Japan. Another major update was released on Wednesday, when word reached the public that Twitter inked a deal with Google, agreeing to have its tweets posted as search results in its search engine.
The company’s revenue has grown steadily every quarter, doubling the money with each report. However, investors are not interested in the momentum factor, and they grow concerned about the poor reports in measuring Twitter by its user growth.
In the end, Wall Street investors only want to see that more and more people are joining Twitter, and they spend more and more time using it. Shyam Patil, one of the analysts at Wedbush Securities, wrote in his research report that the company believes that user growth, one of the most significant markers for showing progress in this business, should remain the focus, even though revenue and profitability are also increasing, as a side effect.
If we look at the numbers, Wall Street has plenty of reasons to be worried: the third quarter showed 284 million monthly active users. This number increased with only 5% from the second quarter. Consequently, analysts are skeptic about Twitter’s ability of stopping this slowdown in user growth, so their predictions for the fourth quarter dropped. The new estimation shows a growth of only 2.8%, reaching 292 million users. If the expectations come true, great pressure would come upon Twitter’s CEO Dick Costolo, amounting to the smallest quarterly profit in the company’s history.
In his latest efforts of convincing Wall Street that Twitter is still relevant, Costolo has been trying to include more people in its audience, such as those who are not logged-on users, but they still see content from Twitter on other parts of the internet. However, his efforts were met with a skeptic look.
Analysts are not sure if the new deal signed with Google will convince investors of the growing audience of Twitter, increasing the number of the company’s logged-out users. Most likely, Twitter will also have some financial benefits from licensing fees in the deal.
Analyst Carlos Kirjner has expressed his doubt in a recent research report about how the non-logged-on readership will make a vital transformation in Twitter’s relevance. In his opinion, the focus of the company should be raising its user growth trajectory, and not gaining logged-out audience. Focusing on user growth, Twitter could also show that more users will mean more money.
Costolo, however, is ready to play a new card, promising that Twitter will become more welcoming to new users, and more appealing to its current ones. In an internal memo, the CEO told his employees that Twitter is getting ready to battle the trolls who have been rampaging for years. He says he will take action against people who use the social network for abusive purposes, harassing other users and driving them away, an issue which has grown throughout the years. However, the memo showed Costolo feeling unprepared for such a task, admitting that fighting trolls on the platform has not been a forte of the company.
Even though Twitters’ stock on the market dropped with 40 percent over the last year, board member Peter Currie has shown heartily support for its CEO, trying to erase speculation. In the same manner, but a bit too overboard, co-founder and board member Jack Dorsey went on a 17-tweet long praise for the efforts of Costolo and the company’s.
In spite of these efforts, not even half of the analysts who study Twitter recommend that we should buy shares in this company. Costolo has been put under pressure from many sides. Apart from showing disappointing numbers in user growth, he was blamed for not presenting a clear strategy for the company, which is experiencing unbalance due to a number of management changes under Costolo’s administration.
However, he is still positive that adding new products and extending Twitter’s ads beyond itself will help the company make a much-needed transformation and change Wall Street’s perception. Costolo founds his hopes in the way Facebook turned the ship around in 2013, when it exceeded expectations about monetizing mobile.
Analyst Brian Wieser, from Pivotal Research Group trusts Twitter, and he showed that by raising his price target from $42 to $50, in an effort of increasing positivity around the company.
Image Source: The Next Web
