Twitter shares dropped about 14% today following a Q1 report which showed lower revenue than expected for the company. Back in Q4 of 2015, the company had mixed news to report. On one hand its user base was actually shrinking, from 307 million users in Q3 to 305 million users in Q4. However, the company was also reporting an increase in revenue due to new deals with advertisers.
In its Q1 report, Twitter has managed halt the decline in userbase and actually experience growth again. The platform now has 310 million active users. The company also reported a revenue of $595 million for the quarter, an increase of 36% year over year. Despite an increase in revenue, the company is still not turning a profit, and revenue growth below expectations may cause doubts as to whether the company will ever be profitable.
Back in Q4, Twitter's plan to increase revenue heavily focused on new opportunities for advertisers. Some of these new opportunities include video advertisements. However, Reuters reports that even though users are watching and sharing more videos, advertisers are slow to capitalize on it and prefer to spend their money on promoted tweets. Additionally, many advertisers have chosen to hold back on spending and save their money for major events later in the year, like the Olympics. These two factors may be the main reasons behind Twitter's lower than expected revenue.
In order to increase revenue, the company intends to focus on live video content and attract users to its Periscope app. The company plans to seek out new deals so it can eventually have millions of advertising partners like its competitors, as opposed to merely hundreds of thousands of advertisers like it has now. Twitter CEO Jack Dorsey also stated that talent recruitment is a top priority this year, especially on engineering and product teams.
The Q1 report also states that safety is a major focus for the company. It mentions the Trust and Safety Council that was established earlier in the year, as well as describing a recently added feature which allows users to report multiple related tweets in a single report.
Will Twitter ever be profitable? Leave your comments below.
