Expectations are so low for Twitter that a Wall Street prediction-beating decline in revenue, its first since going public in 2013, sent stock soaring 9 percent Wednesday. The company leapt over a low earnings bar during the first quarter of 2017, but also added 9 million users — the largest quarterly net user gain in two years — bringing its total reach to 328 million users.
Unfortunately for Twitter, the company’s best still falls woefully short in a field of social platforms that are surging of late.
Twitter grows while Instagram soars
Instagram is growing faster than at any point in its seven-year history. Within hours of Twitter’s earnings report, Instagram boasted adding 100 million monthly active users (MAU) during the previous four months, bringing its total reach beyond 700 million. Snapchat’s user growth took a hit during the second half of 2016, but it claimed 158 million daily active users leading up to its initial public offering last month. Twitter says its daily active usage is up 14 percent year-over-year, but doesn’t say how many people use Twitter on a daily basis.
CEO Jack Dorsey attributed the gains in daily and active monthly usage to faster updates and changes the company has made to the timeline and notifications during the past year. The “relevance-ranked” timeline has enabled Twitter to display broader set of tweets from a person’s network and the company is “applying more deep learning models to make sure we’re showing more relevant tweets first,” he said during the earnings call. “We’ve been using machine learning better to make sure that when people are outside of the app, that we’re notifying them with something that really matters, bringing them back to the app and increasing engagement so they can get a better experience.”
New and “resurrected users” also began following more news and political accounts during the first quarter, particularly in the United States, according to COO Anthony Noto. “We believe Twitter is the best at showing what’s happening in the world and what’s being talked about,” he told investors. “Having the political leaders of the world as well as news agencies participating in driving that is an important element to reinforcing what we’re the best at.”
Twitter’s leaders say they’ve also made meaningful progress this year in the fight against abuse on its platform. “In the past two months alone, we’ve released a series of product features and machine-learning models, and as a result we are seeing a significant decrease in the people experiencing abuse on Twitter as measured by reports and blogs,” Dorsey said. “There’s lots more to do, but we’re on the right path.”
The earnings beat and rally on Wall Street was a rare win for the struggling company. Since Dorsey returned to lead Twitter almost two years ago (he was named permanent CEO in October 2015, after a six-month stint as interim CEO), he has sought to simplify the service and narrow the company’s focus on improving core features that languished or became too complex for mainstream users. “I feel confident that we have a good understanding of what we need to do, that we're focused only on what matters, that we're removing anything that may have been distracting,” Dorsey said.
Live video is a mixed bag for Twitter
Live video has also factored heavily into Twitter’s attempted revival, but the results are mixed. The company recently lost the rights to livestream a package of National Football League games after a single season, but it continues to push into other sports, news and entertainment. Twitter broadcast 800 hours of live video during the first quarter and plans to eventually run a nonstop live feed with programming from a growing group of media partners.
Almost 14 percent of Twitter’s monthly active user base, 45 million people, viewed live video on the platform during the first quarter, according to the company. Half of the live streaming audience is under 25 years old and more than half of all viewers are tuning in from outside of the U.S., Noto told investors.
“For Twitter to do well with live video, it needs compelling content, not just ambient content,” writes Jan Dawson, founder and chief analyst at Jackdaw. “Color me skeptical that this effort will make a big difference to Twitter’s user base or its ability to monetize it. Live video still feels like an interesting complement to Twitter’s core value proposition rather than being central to it, and I don’t see that changing anytime soon.”
Twitter posted a $62 million net loss on $548 million in revenue during the first quarter. The company hasn’t turned a profit in more than 11 years and revenue declined 8 percent year over year. While there are positive signs in daily and monthly active usage, Twitter’s successes will once again be overshadowed by Facebook when it announces earnings next week and could be subjected to further scrutiny when Snap reports its first public earnings report on May 10.
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