TWITTER SHARES DROP 10% AS REVENUE OUTLOOK DISAPPOINTS
Shares in Twitter have fallen 10% after the social media company’s revenue forecast fell short of expectations. Revenue for the first quarter of 2019 is now expected to be between $715m and $775m, below analysts’ forecasts.
Twitter also warned that its operating costs could rise 20% in 2019. The share fall came despite the company reporting profits of $255m (£197m) for the final quarter of 2018, more than double the $91m profit it made a year earlier, as advertising revenues grew.
The rising costs come as social media companies face increased pressure to police the content of their sites more closely, following scandals over mental health, user privacy, hate speech and political campaigning.
Twitter said it had removed millions of abusive accounts as part of its clean-up effort, prompting a fall in monthly users. Currently 321 million people use Twitter, as calculated on a monthly basis, down from 330 million a year earlier.
Despite the decline, revenue in the last quarter increased 24% to $909m as video advertising grew. Jack Dorsey, Twitter’s chief executive, said “2018 is proof that our long-term strategy is working”. “We enter this year confident that we will continue to deliver strong performance by focusing on making Twitter a healthier and more conversational service,” he added.
Twitter said it would stop disclosing monthly active users and switch to reporting active daily users instead. On a daily basis, the platform drew 126 million users in the fourth quarter – up 1.6% from the prior period. That compares to Facebook’s 1.5 billion daily users and Snapchat’s 186 million.
Clement Thibault, analyst at global financial platform Investing.com, said: “Total user numbers are down, but we’ve known for a while now that Twitter has a fake-users problem and is trying to deal with it, so that shouldn’t come as a surprise to anyone.
“Higher operating expenses, on the other hand, are a bigger problem, as I anticipate Twitter’s margins and profits to shrink considerably in 2019.”