For Twitter, a High-Impact Conundrum - eMarketer

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For Twitter, a High-Impact Conundrum

Visibility is up, revenues are flat

February 10, 2017 | Social Media | Ad Spending

Twitter faces a conundrum: At a moment when its platform is more visible and influential than ever before, key measures like revenues and usage appear to be stuck in neutral.

CEO Jack Dorsey said as much during the company’s fourth-quarter earnings call on Thursday morning. “The whole world is watching Twitter,” he said. “While we may not be currently meeting everyone’s growth expectations, there is one thing that continues to grow and outpace our peers: Twitter’s influence and impact.”

The company reported fourth-quarter revenues inched up 1% year over year, but US advertising revenues declined by 7% over the same timeframe.

Ad revenues were once a bright spot at Twitter, even as usage growth slowed. “But with so many quarters of slowing usage growth, it was only a matter of time before revenue started to take a hit as well,” said Debra Aho Williamson, principal analyst at eMarketer.

User numbers told a similar story. Twitter said US monthly active users grew 3% year over year in the fourth quarter to 67 million, confounding expectations among some observers that President Donald Trump’s use of the platform would drive strong growth.

Even that level of growth may be hard to maintain. eMarketer estimates that the number of people in the US with a Twitter account will increase only 1.9% in 2017. And growth is seen edging even lower in the following two years.

Ironically, Twitter’s high visibility in a charged political environment could actually be a liability. The company has tended to rely on brand advertising for much of its revenues, and brands are skittish about being associated with controversy of almost any type, political or otherwise.

Meanwhile, because companies tend to plan their ad spending months in advance, Twitter is likely in for several more quarters of ad revenue pressure until it can re-energize its ad product offerings, Williamson said.

Rimma Kats

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