Twitter’s disappointing fourth quarter results, with advertising revenue falling for the first time since its IPO, show it needs to do more to appeal to advertisers.
Twitter reported a loss of $167m (£133m) in the final quarter of 2016, compared to a $90m (£72m) loss in the same period in 2015.
Its active users increased by 4% to 319 million, as people turned to the social platform to follow and react to US President Donald Trump. But its revenue from ads fell slightly to $638m. As a result, the platform’s shares were down 10% in early trading.
“We said on our last call that revenue growth will lag usage. As you see in our numbers and our outlook, this has proven to be the case. Our advertisers need the same approach we apply to our consumer service, reset and focus on our strengths,” Jack Dorsey, Twitter co-founder, explained on Twitter’s earnings call yesterday (9 February).
Dorsey admits the whole world is watching Twitter and says it will have to prove to advertisers the platform is easy to use and works for them and their customers and that 2017’s challenge is simplifying and differentiating its revenue products.
“The whole world is watching Twitter. While we may not be meeting everyone’s growth expectations, there’s one thing that continues to grow and outpace our peers: Twitter’s influence and impact,” Dorsey commented.
eMarketer’s senior analyst, Bill Fisher, agrees that the problem isn’t Twitter’s user growth but how it monetises it. He says the platform’s high levels of engagement could prove to be a hindrance as advertisers question the wisdom of positioning their brands in what is often a very charged environment.
Instead Twitter focusing more on its live videos, as it did throughout Trump’s campaign and the NFL, is the way forward, he says.
“It’s ironic, but making Twitter look more like traditional TV might be the best way forward,” Fisher explains.
Twitter says it will continue to focus on the quality of its video in 2017, something it hopes will maintain and increase interest in the platform. But the majority of its effort will continue to be its timeline and notifications to help people see what is happening easier. This will include Twitter organising its tweets around relevance and the topics, interests and passions people care about.
Twitter needs to stop spending time on pointless features like stickers and focus on what the majority of its audience like about it
Hannah Anderson, Social Chain
Jerry Daykin, global digital partner at media agency Carat, says Twitter’s recent function updates, such as its explore tab and ‘In case you missed it’, have already brought people back to the platform.
“The narrative that Twitter is dying has always been more of a headline than a reality and while it’s not out of the woods yet, it does show early signs of a recovery,” he comments.
Twitter falls behind competitors
Twitter’s competitors cannot be overlooked either, as Social Chain’s media director, Hannah Anderson says Twitter needs to overhaul its “outdated” advertising platform to appeal to marketers.
“Twitter needs to stop spending time on pointless features like stickers and focus on what the majority of its audience like about it and make that the best god-damned feature in the world,” she comments.
She says the platform needs to reduce its costs as the CPM on Twitter is a lot higher than Facebook, meaning more people opt for the latter.
Anderson also believes Twitter’s lack of innovation has made it a place to go to for current news but nothing more, and that the problem with this is that if there is nothing going on in the world Twitter becomes unnecessary.
“In comparison to Facebook, Instagram and now Snapchat, the targeting options and audience segmentation is left far behind, with most advertisers staying clear of native Twitter advertising completely.”
Twitter’s challenge for 2017 will be to work out how it can maintain and develop its relationship through advertisers and to convince them it is still a primary platform. The problem here lies with the fact that unless the adverts are in-line with in the moment news, there is no real point in advertisers advertising on the platform.