Twitter Inc added no new users in the fourth quarter, confirming the fears of advertisers and investors alike: The social-media site is in real trouble.
The company has faced sharp criticism over slowing growth in its audience since its 2013 initial public offering. Even as chief executive officer Jack Dorsey rolled out efforts to make its product more mainstream, by some measures Twitter’s user base shrank from the third quarter.
Twitter tried to divert Wall Street analysts’ attention by listing reasons to believe in its future, including a stronger focus on live events and video, several coming tweaks to the product that it says will benefit advertisers, and a vow to aggressively hire good board members and engineers. Still, a disappointing first-quarter revenue forecast indicates the lack of user growth is also hurting its ability to draw in more ad dollars, threatening its core business.
“This is the critical period for Twitter, and they need to show more than just optimism,” said Rob Sanderson, an analyst at MKM Partners. “It’s very vulnerable right now, and especially if we are heading into a recessionary environment, those ad dollars are going to become more difficult to get - for everybody.”
Monthly active users were 320mn in the last three months of the year - the same number the company reported in the third quarter - while analysts on average had estimated 324mn. Twitter said it will stop including users on older, non-smartphone mobile devices in its overall count. Without these so-called SMS fast followers, Twitter’s user base fell from the third quarter, to 305mn from 307mn, though the company said since the fourth quarter ended it has already recouped those user losses.
Revenue in the first quarter will be $595mn to $610mn, the San Francisco-based social network said on Wednesday in a statement. That compared with an average analyst projection of $627.6mn, according to data compiled by Bloomberg.
Twitter shares have dropped 35% this year amid deepening scepticism about the company’s turnaround efforts under Dorsey, a co-founder who returned as CEO. Dorsey, who started his tenure in October with staff cuts and the appointment of a new chairman, has been rallying his teams to make the site more accessible and useful for following news stories and live events. On Wednesday he outlined his five priorities: Making the main product easier to use, investing in live streaming video, giving creators and influencers better tools, investing in making Twitter safer, and supporting developers.
Dorsey’s bullishness wasn’t enough to boost the shares, which have declined 68% in the past year, in extended trading. The stock fell about 3.3%, after sliding as much as 14% immediately after the fourth-quarter earnings report. They rose 4% to $14.98 at the close in New York.
In the fourth quarter, sales rose 48% to $710.5mn, in line with analysts’ predictions. Excluding certain costs, fourth-quarter profit was 16 cents a share, compared with an average analyst estimate of 12 cents. The company’s net loss narrowed to $90.2mn, or 13 cents, Twitter said in the statement.
Twitter appointed Dorsey as permanent CEO in October after a search to replace Dick Costolo, who resigned amid pressure from Wall Street over slowing growth. Dorsey, who also runs payments company Square Inc, has been pushing the staff to change even the aspects of Twitter’s site that seem untouchable. For example, Twitter has considered lifting a 140-character limit in posts, which has been the format since the company started. The company said on Wednesday it will also change the “.@” structure for replies on the site. Earlier in the day, Twitter said it would start displaying more popular tweets at the top of a user’s feed, instead of keeping them in the company’s traditional reverse-chronological stream.
“They definitely needed to do something in order to boost new user growth,” said Orli LeWinter, vice president of strategy and social marketing at digital marketing agency 360i. “Hopefully this is it.”
The year will include many more “significant changes” for the product, Twitter said.
Twitter is also working to deal with its user-growth challenge another way: By making it possible for non-members to see advertisements if they click on a tweet, say, in a Google search or a news article. Opening up advertising to that audience adds 500mn people, Twitter has said, and makes its business model more like YouTube’s - you don’t have to log in to be valuable to the company. The early efforts in this direction look promising, the company said on its call with investors.
Still, Dorsey’s job hasn’t been easy. A week after he officially retook the helm, Twitter cut 8% of its staff. In January, five executives, including the heads of product and engineering, announced their departures during the same weekend. The company has lost at least 20 high-level executives since its November 2013 initial public offering.
“The continuing management instability is likely to further delay the development of the technology and product that Twitter needs to drive user growth, engagement, and monetization,” Heath Terry, an analyst at Goldman Sachs, said in a January note to investors.
Dorsey is working to build out the leadership at Twitter - including his bosses on the board. After he took the CEO job, the board appointed Omid Kordestani, formerly of Google, to be executive chairman. Kordestani has been involved in many key decisions at the company since. The board is getting close to adding two other members, people familiar with the matter have said. Dorsey on Wednesday said he wants to add board members with public company experience, media expertise and international experience.
Meanwhile, social-media competitors like Instagram and Snapchat are amassing larger audiences and focusing their products more on what Twitter does best: Real-time news and information. Larger rivals, like Facebook and Google, have built out real-time advertising capabilities, too.
Twitter is expected to capture 9% of worldwide social-media advertising spending this year, compared with Facebook’s 65%, according to EMarketer.
“They were the only game in town for live ads a while ago - - even a year ago,” said Jonathan Adams, chief digital officer at Maxus, a media agency. “Their share is eroding relative to the gains their competitors are making.”

CEO is  making
big product
changes, but
users not wowed

Reuters/San Francisco


Since returning to Twitter Inc in July, chief executive, Jack Dorsey has made a handful of dramatic changes to the micro-blogging service - and promised more.
But the new features so far have been unsuccessful at doing the one thing Wall Street wants most: Getting more people to use the service.
Analysts say Twitter’s stock price, which has reached record lows, is unlikely to rise until the company shows significant user growth.
“They’ve been a public company long enough where they should have been able to increase the user base and fix a lot of the product issues to appeal to a larger audience,” said Blake Harper, Topeka Capital Markets analyst.
In a letter to shareholders released on Wednesday, when Twitter reported its fourth-quarter earnings, Dorsey outlined for the first time his strategy for the company’s future. But the plan lacked many details about upcoming product plans and was overshadowed by flat user growth in the quarter, the first time since Twitter went public in 2013.
The anaemic growth reflects an unsettling reality for Twitter: Product changes have not reignited excitement.
In October, Dorsey unveiled Moments, which aims to make it easier for users to follow major events and breaking news, but it has failed to gain traction, analysts say.
Dorsey has also experimented with changing one of Twitter’s signature features, by expanding the 140-character limit.
On Wednesday, Twitter announced it changed its timeline - as its homepage is known - to show a customised, algorithmic-driven feed of tweets that are thought to be most interesting to each user, rather than the uniform presentation to all of tweets in reverse chronological order.
Some users have reacted negatively to the idea of radical changes to the way Twitter works, with many taking to the service using the hashtag #RIPTwitter.
Up to now, advertisers have been disappointed with the failure to reignite user growth, though some have expressed tentative optimism about the changes.
“U guys have #riptwitter all wrong .. This is best change to platform ever,” tweeted Gary Vaynerchuk, CEO of Vaynermedia, which helps advertisers build campaigns.
In his Wednesday letter to shareholders, Dorsey made clear he is focused on increasing the number of people who use the service. One part of the strategy is intent on making the site easier to use, since analysts say Twitter has trouble keeping new users on the service because of its complexity.
“We have some really weird rules,” Dorsey admitted.

Backlash risks with new
order for timeline

Bloomberg/San Francisco


Twitter Inc is changing its timeline to display popular tweets first, instead of the latest posts, a long-anticipated step that’s likely to anger its most passionate users.
While they might prefer the site to stay the way it is, Twitter has long known that the current format can be hard for new and infrequent users to digest. Because of the sheer volume of tweets passing by, people can miss the most important items, Twitter said in a blog post on Wednesday. The new change comes after months of user testing, showing that people interact more if they are shown the best tweets, the San Francisco-based company said.
“We’ve already noticed that people who have used this new feature tend to retweet and tweet more, which is good for all of us,” Twitter said in the post.
The revamp is chief executive officer Jack Dorsey’s latest attempt to reshape Twitter as he seeks to jump-start user growth and draw in more advertisers. It’s a risk, and the new format will probably meet with some resistance. When reports of a new timeline order recently emerged, Twitter’s most vocal users protested so much that #RIPTwitter was a top-trending topic on the site over the past weekend.
Dorsey sought to calm them down with a post saying, “we never planned to reorder timelines.” Technically, he’s right: The most popular tweets will still be displayed in chronological order — it just won’t be all of them. Once people see the top recent tweets, the timeline reverts to the usual reverse chronology. Users will also be given the choice of keeping their old settings. Popular tweets will be selected based on users’ past activity, including accounts they interact with and interests, as well as what’s going on in their networks.
The new design is aimed at making sure people see posts from others, including brands that are active on Twitter. The feature is effectively an expanded version of earlier product changes, such as a “while you were away” section for missed tweets. Twitter’s loudest users are now warning that it will become more like Facebook Inc, which also adopted similar changes in the past few years to declutter its news feed by showing content that its software deems most relevant.
Any reaction to the new feature will probably be short-lived.