Twitter Shares Fall Amidst Revenue Concerns

Jack Dorsey, Chief Executive Officer at Twitter Inc. received his first report card on Tuesday and investors weren’t pleased with the results he has gotten. Soft quarterly user growth was reported by the microblogging platform for its social media service and the forecast issued for the holiday season was quite gloomy. This has given rise to concerns about the viability and soundness of Twitter’s advertising business. After the announcement, the share price of the company declined by 13% to reach $27.20. The company’s shares had been climbing rather sharply since October 5th when it was announced that Mr. Dorsey would be taking over the reins.

No reasons were provided by Mr. Dorsey and his executives at the earnings call for the softer revenue guidance, but they had previously indicated that it would take some time for the social network to exhibit some meaningful growth in users. During Tuesday’s earnings call, Mr. Dorsey said that they were focused on three things, which were proper execution, better communication of values and simplified services. He added that they were making considerable progress in all three elements. There was very little growth in the third quarter concerning the number of Twitter users that sign up for its mobile application or its web service at least once each month.

Only three million users were added, which is an increase of about 1% and increased Twitter’s total to 307 million users. As far as users who use the service via a messaging platform is concerned, they expanded to 320 million, which is an increase of 1.3%. Most of this growth in user base is outsourced from overseas as there hasn’t been a surplus of new years on Twitter in the US this year. This is a downside because the social network can charge more for displaying ads in the US as opposed to other parts of the world.

The revenue for the third quarter increased by 58% to reach $569.2 million. This was way above estimates and was achieved partly due to new video ads. However, it was the fifth straight quarter of slowing growth for the company. It was also noted by the firm’s executives that it has crossed the milestone of 100,000 advertisers and will also convince the nine million medium-sized and small business on the platform to indulge in advertising. In regard to expectations for the fourth quarter, the predicted revenue is somewhere between $695 and $710 million.

However, this is below the expectations of the analysts on average, which are about $739.7 million. In recent months, the social network has been on a soul-searching trip as Mr. Dorsey is trying to get mainstream internet users to find value in the service he helped launched nine years ago. Investors closely watch the user growth metrics of Twitter as they believe that they influence the size of the social network’s business, which is how it makes money. They are definitely eager to see Twitter reach the same scale as its main rival Facebook Inc., which has five times more users than Twitter.