In its quarterly report for Q3 of 2016, Twitter has announced a restructuring which will see 9% of its work force laid off. The company has never turned a profit in its decade-long existence, and slow user growth throws doubt on whether the company will ever be profitable in the future. Cutting employees and services will reduce the company’s expenses and may get the company on a path to profitability.
The quarterly report shows a modest increase in revenue and user growth, which still beat out even lower expectations by analysts. Revenue was up to $616 million for the quarter, an improvement of 8% year-over-year. Monthly active users rose to 317 million, an increase of 3% year-over-year. As in previous quarterly reports, Twitter mentions video, and in particular livestreaming of major events, as an avenue to grow revenue. However, when asked by investors whether streaming events like the presidential debates and the Olympics improved Twitter’s growth, the company’s CFO stated that there would need to be such an event “every day” to meaningfully affect growth. However, he added, “that’s where we’re headed.”
Another big item in the report is the announcement of another round of layoffs at the company. This comes approximately one year after 336 employees were laid off. This round of layoffs will effect a similar number of employees. The areas effected by restructuring and layoffs will primarily be sales, partnerships and marketing. While reducing the number of employees will cut expenses in the long run, the company will incur short term expenses. The company expects cash expenditures between $10 and $20 million in severance costs in Q4 as a result of the layoffs.
The company has also stated that it improving safety is critical to grow its userbase. It has announced some upcoming changes in the next month on that front, although the report is light on specifics. It states, “Next month, we will be sharing meaningful updates to our safety policy, our product, and enforcement strategy.”
Although Vine was not mentioned by name in the report, its discontinuance is likely part of the company’s efforts to cut expenses and trim away any unnecessary services.
Can Twitter become profitable by cutting employees and services and focusing on streaming live events? Leave your comments below.