Twitter has been performing relatively well in recent quarters, reporting steady increases in the number of active users. In its second quarter earnings call yesterday, Twitter confirmed the growth has now come to an end. While it pointed out that its number of users is up 5 percent compared to the same period last year, the new stagnation has alarmed investors.
In the U.S., the number of Twitter users actually declined by 2 million to 68 million. The U.S. is Twitter’s most important advertising region so revenue has been squeezed by the drop in users. U.S. ad income fell by 7 percent to $335 million as Twitter faces competition from ads on rival platforms like Facebook and Instagram.
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Twitter reported a 4.7 percent drop in overall revenue, leading to a net quarterly loss of $116.5 million. The $573.9 million recorded revenue was higher than what analysts had expected but has done little to allay concerns about the future of the platform. After the earnings call, Pivotal Research analyst Brian Wieser flatly commented Twitter “always was and always will be” a “niche” platform in a Bloomberg article.
The disappointing performance caused Twitter’s stock price to tumble by over 14 percent after the announcement. Hopes that the company’s darkest days could be behind it have been the dashed by Twitter’s continuing inability to reach new users. The platform is at risk of becoming stagnant as it fails to compete with Facebook, Instagram and Snapchat.
Twitter itself is still trying to find positives in the data. It said 12 percent more users now use its platform every day, compared with the same period last year. Even this figure has declined since the last earnings call though. Twitter previously reported year-on-year growth of 14 percent for the first quarter of 2017.
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With falling revenue and user growth that’s back to being non-existent, Twitter’s future is once again coming under threat. Analysts want the company to create a simpler and more engaging core product with a wider appeal. In the past year, Twitter has begun to act on these suggestions, launching a completely redesigned mobile app in June.
Twitter is now transitioning to a newly solidified focus. In tandem with the app relaunch, the company announced a transition to being an in-the-moment, video-first news and media service. Twitter also promised to do a better job of listening to what its users want and responding to feedback. The earnings call suggests it should also pay attention to what would-be users want too, before it finds itself entirely overshadowed by newer, more engaging alternatives.
