Twitter shows signs of life in third quarter as user growth, sales rise

New York: Twitter Inc. beat sales estimates and added more monthly users, indicating signs of life at the social network that has struggled to attract new consumers and advertisers. The shares surged.

Twitter has been battling the perception that it’s a niche media platform, despite its emergence as US President Donald Trump’s favourite communications tool. The company reported that monthly active users gained 4% to 330 million in the third quarter, a positive sign for investors who view audience size as a measure of Twitter’s long-term health. Daily active users increased 14%, the fourth consecutive quarter of double-digit growth, the company said on Thursday in a statement.

Chief executive officer Jack Dorsey has shifted the company’s focus to videos and live events as a way to spur audience growth. Twitter attributed the user gains to changes making the platform easier to use, improved marketing and heightened awareness of Twitter from global events.

“This quarter we made progress in three key areas of our business: we grew our audience and engagement, made progress on a return to revenue growth, and achieved record profitability,” Dorsey said in the statement.

Twitter reported its net loss narrowed to $21.1 million, or 3 cents a share, in the quarter. Profit excluding certain costs was 10 cents a share, compared with analyst estimates of 7 cents. Revenue declined 4.3% to $589.6 million. Analysts projected $587.5 million, according to data compiled by Bloomberg. Twitter says the better-than-expected sales were driven by its video advertising and data-licencing platforms.

Sales in the US, Twitter’s most important advertising market, fell 11% from the same period a year earlier. The company has failed to capture more than a tiny fraction of the digital advertising market, which is dominated by Alphabet Inc.’s Google and Facebook Inc. Total revenue growth was driven by international sales, which grew 6% from a year earlier.

The company gave a fourth-quarter outlook for adjusted earnings before interest, tax, depreciation and amortization of $220 million to $240 million. Analysts projected $200 million. “We also expect that at the high end of our adjusted EBITDA range, we will likely be GAAP profitable,” Twitter said. The company hasn’t made a quarterly profit on that basis since going public in November 2013.

Shares rose 7.4% to $18.41 in early trading after closing on Wednesday at $17.14. The stock has gained 5.2% this year. Bloomberg LP is developing a global breaking news network for the Twitter service.

Twitter said it had adjusted the number of monthly active users back to the fourth quarter of 2014 after determining it had incorrectly counted users of a service for third-party apps as active participants on the platform. After the change, the company said it had 326 million users in the second quarter, rather than 328 million.

In recent years, Twitter’s user growth has been crimped by its reputation for harassment and trolling, a view that was highlighted recently when it temporarily shut down the account of actress Rose McGowan after she spoke out on allegations of sexual harassment by Harvey Weinstein. And with the controversy over Russian meddling in social media to influence the 2016 US presidential election, the company is finding itself often on the defensive.

“No one is going to pay up for the stock until they see some mechanism for them to grow,” said Michael Pachter, an analyst at Wedbush Securities Inc. “Based upon the way that the president and other trolls use it, there’s a connotation that if you use Twitter, that you’re going to be subjected to open hostility from users.”

Twitter has been moving quickly to address the harassment and the foreign influence. The company said on Tuesday that it’s bringing greater transparency to advertisements on its site by exposing who paid for the ads, who they are targeted to and how long the campaign has been running. Last week, Twitter said it will immediately and permanently suspend accounts that clearly harass or post nude images without consent. Dorsey conceded that Twitter has “to do a better job explaining our policies and setting expectations for acceptable behaviour on our service”.

Twitter has also made improvements to its algorithms that catch spam and malicious actors after researchers found hundreds of thousands of bots, some linked to Russian operators, that posted political messages during the election. Despite the changes, researchers say Twitter’s technology lags behind that of Facebook and Google.

While the company said daily active users increased 14% from a year earlier, it declined to disclose the actual number. The company argues that doing so would result in unfair comparison with Facebook, which has about 1.3 billion daily active users. Competitor Snap Inc. had 173 million daily active users in the second quarter. Aegis Capital Corp. estimates Twitter had 160 million daily active users in the quarter. Bloomberg