For the first time in twelve years, Twitter, the microblogging giant has finally made a marginable quarterly profit. It’s been quite a bumpy journey for Twitter as a public enterprise. While dealing with mediocre revenues, the social media company also faces stiff competition from Facebook, which has overshadowed its revenue driven through advertising since it’s commence. Twitter, when it started had roughly 218 million monthly subscribers, while Facebook users were about 845 million when it started in the year 2012. However, Twitter now has over 330 million while Facebook has more than 2.13 billion users.
On Feb 8, the company reported a decent profit, with a jump of 2% revenue in the same period, over the last year. They managed to pull in $91 mn on $732 mn, and attribute this change to the plethora of updates they made to their product. While their user growth is still stagnant at 330 mn users active each month, investors are happy with the path Twitter is on right now. Changes such as increase of character limit to 280, increased number of mentions and retweets has definitely surged the time spent on the site by users, according to their analysts. With the steady profit ut is generating, iy looks like the Twitter ship is no longer sinking into the unknown abyss. The company will be able to operate efficiently without losing money with a solid structure and size in the forthcoming periods.
This development is against the norm followed by all the major browsers who believe in allowing users to delete the history of their previous website visits. Twitter has confessed that some of its partnership agreements does allow them to connect non-personal and device-level data to be tallied with your name and email, unless you intentionally and actively choose otherwise. Unethical? Probably.
A Move to Lure Advertisers
If the competition from Facebook, WhatsApp, and YouTube wasn’t already mountainous enough, Instagram, and Snapchat have eaten-up a significant chunk of the social media market in the recent past. Twitter is now over a decade old and needs to generate more revenue. This move to expand privacy settings is probably aimed at helping advertisers to target you on the platform, and the absence of “Do Not Track” option is along the similar lines. While you still will be able to opt out of personalized ads and data tracking, leaving these options turned on will mean your browsing history from other devices will be tracked, leaving you as a prey for the advertisers.
European Countries Excluded
Twitter has promised to offer more granular privacy controls.
Slow rise in the number of users and an inevitably slow business from ad inventory due to the sluggishly rising user count are expected to bring trouble to Twitter’s revenues. Analysts from Wall Street think that the company’s business is declining and the company is expected to report a year-over-year decline in revenue, which would be the company’s first ever loss, when the earnings are released on Wednesday.
Analysts estimate the company will record profits of around one percent per share on the 2017 Q1 revenue of US$512 mn. If the estimates are correct, the company would have suffered a loss of around 14% as compared to the US$595 mn that the company generated in revenues during the 1st financial quarter of 2016. Twitter has reported year-on-year growth in revenue for every quarter ever since it has gone public in the late 2013.
Declining Number of New Users could also mean Decline in Ad Revenues
Wall Street’s estimates regarding Twitter’s business could be wrong as well, but a decline in business is, of course, bad for the company as it is seeing a plateau when it comes to number of new users. Decline in the number of new users would also directly impact the company’s revenue from ads – the easiest way to generate revenue for a social media company.
But if Wall Street’s analysis proves correct for the company, Twitter has a tough road ahead to frame its slowing revenue stream. If the earnings are indeed low, possibilities of takeover will start doing rounds in business circles. The company was also exploring sale options the previous year but the price tag was a bit high for most companies interested in buying it.
Last year, the company was valued at around US$13 bn, which was when analysts estimated that it could be sold at around US$18 bn. Now that its valuation has come down to US$10.7 bn, it will be interesting to see how much the company is valued for possible suitors.