Twitter Inc. reported its first quarter earnings this Thursday, opening with an increase in revenue on the strength of ad sales, coming to a total of $1.04 billion for this quarter, a 28% increase from last year’s $808 million. The microblogging company also predicted their second quarter revenue to be in the range of $980 million and $1.08 billion.
Analysts are sceptical, however, as Thursday’s after-hours market showed that Twitters’ TWTR share had fallen as much as -8.5%, closing at $65.09. The current status of TWTR shows it has experienced a -15.16% drop, current price per stock being $55.22. The company stated their user growth rate was 13% in the U.S., and 22% internationally.
Ned Segal, current chief financial officer of Twitter stated that their revenue growth was affected by the outbreak of the COVID-19 pandemic and the global quarantine that ensued over the past year. Twitter Chief Executive Jack Dorsey said that the company has not done enough to get people to what they’re interested in fast enough, but that with new products like Topics, they’re serving the two core jobs of informing users about what’s happening and enabling them to talk about it.
The website states that Topics is a newly unveiled feature by which users will be matched with topics the Twitter algorithm considers them to be interested in based on user profile and activity, and also allow users to independently look up topics they are interested in and follow them on the new Topic Browser.
Wedbush analyst Ygal Arounian wrote in a note on Friday that he thinks Wall Street will focus on the slowdown in user growth, noting that investors are increasingly focused on whether users remain engaged with apps such as Twitter now that the pandemic is receding in the U.S. According to Yahoo Finance, some advertisers pulled back their spending because of the riot at the U.S. Capitol on 6th January.
While Twitter is facing what seems to be the start of a decline, its main competitor, Facebook, smashed analyst estimates in their quarterly sales report. Analyst Justin Patterson stated that “It’s disappointing that Twitter didn’t catch this wave in online advertising growth, though there will be more opportunities ahead”.
Twitter has also had major technical issues in the past year. The Financial Express reported an access issue on 17 April for twitter users around the world, stating more than 40,000 users being affected on that day and calling it one of the longest service errors in recent social media history. Down detector displays three major outages on Twitter since the start of the year, with several minor issues reported by users over the last four months.
Twitter has also been in the crux of some controversies, in part because of its ban of Trump and the scrutiny from Congress over its role with other social media sites in policing user speech. Investors are not all pessimistic about Twitter’s future growth, however. The company is working on several new products, including the aforementioned Topics feature and audio chatrooms to compete with the popular start-up Clubhouse, which could lead to more future revenue. And Twitter’s hiring process has not slowed down during the pandemic either. Twitter currently has a total of 6,100 employees, which is a 20% increase from last year’s numbers.
In closing, Twitter has experienced a number of issues in recent times with its numbers and user experience, but there are a few variables that could help Twitter’s ratings bounce back up as the COVID-19 issue gets controlled around the world. Investors are divided on the future of Twitter Inc., and the nature of progress of these variables can either boost it or cause a further decline.