Twitter announced its Q4 2016 earnings on Thursday, and the results weren’t great. Despite being the social platform of choice for the leader of the free world, Twitter missed analyst revenue expectations. Even more disturbing, its ad revenue was actually down for fiscal year 2016 from 2015. That’s right, in a year where Twitter was in the media more than ever before, it’s advertising revenues decreased.
What the hell, Twitter?
On the investor call, CEO Jack Dorsey and COO/CFO Anthony Noto admitted that it isn’t making money the way it needs to be. In prepared remarks at the start of the earnings calls, Dorsey said:
We said on our last call that revenue growth will lag usage. As you see in our numbers and our outlook, this has proven to be the case. Our advertisers need the same approach we applied to our consumer service: reset and focus on our strengths. This means clearly differentiating and complementing Twitter’s real-time nature and proving to advertisers that Twitter is easy and works for them and their customers.
In other words, advertisers would rather spend money advertising with Facebook or Google (and maybe even Snapchat), than with Twitter. Twitter’s direct response ads in particular have been unpopular with advertisers, who have chosen to go to platform that get them a better return on investment (ROI).
Moreover, that so called “Trump Bump” that many analysts had hoped would drive engagement and users back to Twitter, hasn’t really panned out. Although Noto said that “the president’s use of Twitter had broadened the awareness of how the platform can be used,” he also admitted that it hadn’t had any material impact on user growth or engagement. So many users engage with tweets on the platform on any given day, that all the retweets and favourites that Trump gets are really just a drop in the bucket.
And if you think about it, having Bernie Sanders print out Trump’s tweets is great for the media, but it does very little for helping Twitter make actual money.
When asked on the earnings call about whether the fact that tweets are often embedded on websites (such as this one) or discussed on television, was ultimately a bad thing for Twitter, Noto disagreed. He said that when Twitter looks at the “top of our funnel” (the number of users coming into Twitter each day), that figure is increasing, precisely because of the sort of promotion discussions on other forms of media give them. If Twitter saw a decline in that funnel, Noto said, the concern might have more merit.
Still, some analysts think that Trump’s frequent usage of the platform could actually hurt Twitter with advertisers. Arete Research co-founder and senior analyst Richard Kramer spoke with CNBC on Thursday about how he sees Trump negatively impacting Twitter’s relationship with advertisers.
“This is not a platform that advertisers will want to, in advance, associate themselves with,” Kramer said, noting that ad campaigns are put together long before they run.
“Can you imagine Nordstrom running a campaign on Twitter, pre-buying it or planning it ... and finding out that the president is slating them on the same platform?” the analyst continued.
Kramer went on to say the “there’s a lot of brands that just don’t want to be associated with that sort of [abusive and vitriolic] content” that takes place on Twitter. That’s a fair point, though difficult to quantify.
What is easy to quantify, however, is that advertisers want to give Twitter less money than they do other social platforms. And having the President of the United States as your biggest fan isn’t helping.