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Published: Mon, October 31, 2016
Economy | By Melissa Porter

Twitter beats estimates, cuts jobs with eye on 2017 profitability

Twitter beats estimates, cuts jobs with eye on 2017 profitability

Hours after announcing a 9 percent staff cut, Twitter says it's also cutting the Vine looping-video app, which burst to popularity after its launch in 2013 but has struggled to match that growth in the past year.

In the absence of a takeover in the near term and any significant signs of growth, Twitter must push for a turnaround as an independent company.

The company revealed the news - rumoured earlier this week - as it unveiled lacklustre third quarter financial results. The cuts focus "primarily on reorganizing the company's sales, partnerships, and marketing efforts, is meant to create greater focus and efficiency to enable Twitter's goal of driving toward [standard accounting] profitability in 2017", the company said in a statement. According to Twitter CEO Jack Dorsey, the company is moving on the right track and will take all the required steps to make necessary changes to ensure long-term growth. By comparison, its sales in the third quarter of 2015 were up 58% from the year before that. By comparison, year-over-year revenue growth last quarter was 20 percent.

At the end of the third quarter, Twitter boasted 317 million monthly active users, a 3 percent increase over this time a year ago, and up from 313 million at the end of the last quarter.

After a year of uncertainty, things seemed to be looking up for the company last month when some big name buyers, including Disney and software company Salesforce.com Inc., entered into talks with Twitter about buying the service and finding ways to revamp the platform to serve their companies' purposes. As a percentage of revenue, Twitter's stock-compensation costs totaled about 26%, among the largest for companies with $1 billion or more in annual revenue. He added that Twitter needed to grow revenue by $200 million to $300 million a quarter to achieve 2017 profitability. Both figures were on the high end of expectations from analysts surveyed in advance by Yahoo Finance.

Some thought a partial intervention from private equity would help buy Twitter time to turn itself around. "The key drivers of future revenue growth are trending positive, and we remain confident in Twitter's future".

"Next month, we will be sharing meaningful updates to our safety policy, our product and enforcement strategy", Twitter said in its shareholder letter.

In the three months before 1 October, Twitter made a net loss of £83m ($102m), an improvement on the same period a year ago.

Twitter shares, which have fallen by a quarter this year, rose 4% to $18 in pre-market trading in NY.

"In the third quarter we did benefit during the days of the [US presidential] debates in the conversations we had around the debates", Dorsey said.

The social network has confirmed that it will now consider whether posts are in the "public interest" before removing them in future.

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