Twitter Inc. gave a lackluster first-quarter sales forecast and reported tepid user growth, suggesting changes to improve the social-media platform haven’t yet attracted a much wider audience.
Revenue will be $715 million to $775 million in the period, the San Francisco-based company said Thursday in a statement. Analysts, on average, projected $766.1 million, according to data compiled by Bloomberg. The shares slid about 7 percent in early trading.
Twitter has been ramping up efforts to reduce abuse on its platform and root out fake accounts and election malfeasance, issues that have crimped user growth in a competitive digital-advertising market. The company’s share of the lucrative market is expected to decline this year as rivals like Facebook Inc. and Alphabet Inc.’s Google boost their dominance, according to EMarketer.
Daily users rose 9 percent in the fourth quarter to 126 million, a number Twitter is reporting for the first time — and one investors have been asking for as a better gauge of the service’s popularity. The growth rate was also 9 percent in the third quarter and had jumped 12 percent in the fourth quarter of 2017, the company said.
Monthly active users averaged 321 million, decreasing by 9 million from the same period a year earlier and down 5 million from the third quarter. Twitter told investors last quarter that the metric would likely continue to drop as the company cleans up the platform to remove spam and suspicious accounts. The company said it would no longer report the number of monthly active users after the first quarter.
Twitter has said it identified much less manipulation on its service during the 2018 U.S. midterm elections from bad-faith actors located abroad than two years earlier during the presidential campaign. However, the company disclosed in a recent report that it found operations to mislead users on the platform that were potentially connected to sources in Iran, Venezuela, and Russia.
Despite its lackluster user growth, Twitter’s financial health improved after years of losses. The company in 2018 marked its first full year of profitability under generally accepted accounted principles. The company’s shares increased 35 percent in the past 12 months through Wednesday’s close, as investors grew optimistic about Twitter’s ability to attract more advertisers to the service, which has benefited from new formats like video.
The results prove “our long-term strategy is working,” Chief Executive Officer Jack Dorsey said in the statement. “We enter this year confident that we will continue to deliver strong performance by focusing on making Twitter a healthier and more conversational service.”
Fourth-quarter sales increased 24 percent to $908.8 million, beating analysts’ average estimate of $867.1 million. Profit, excluding some costs, was 31 cents a share, compared with the average estimate of 25 cents. The company said costs grew primarily because of hiring and expenses related to video content and infrastructure.
Twitter said its calculation of daily active users captures “monetizeable” users, which aren’t comparable to current participation numbers from other social-media companies that include people who don’t see advertisements. For comparison, Snap Inc. said 186 million people used the Snapchat app daily in the fourth quarter. On Facebook, daily active users averaged 1.52 billion in December.
Twitter is a small part of the digital advertising market that’s dominated by Facebook and Google. Its share of total worldwide digital ad spending is estimated to drop to 0.8 percent in 2019 from 0.9 percent in 2018, according to EMarketer.
The company increased global headcount by 16 percent in 2018, ending the year with more than 3,900 employees.