Twitter on Tuesday forecast second-quarter revenue that will fall short of analysts' estimates, signaling that the social network's struggles to add users have dented advertising sales.
Revenue will be $590 million to $610 million, the company said in a statement, missing the $677.1 million average analyst projection.
Twitter said it added 5 million monthly active users in the first quarter compared to the fourth quarter, for a total of 310 million, reversing a sequential decline from last year's third quarter to the fourth. Analysts had projected 308 million.
CEO Jack Dorsey, the co-founder who took the top job again officially in October, is trying to reshape the company's product and reputation to draw a more mainstream set of users. The company hired a chief marketing officer, as well as curators for a live news product called Moments, meant to make the network less daunting for new users. The latest strategies so far haven't solved declining interest from advertisers and users beyond its central constituency of journalists, celebrities and politicians.
"There's risk that Twitter is a deteriorating asset," Mark Mahaney, an analyst at RBC Capital Markets, who has a hold rating on the stock, said before the earnings report. "I just haven't seen enough product improvements for an experience that's just materially better than people have seen in the past, or appeals more to the mainstream."
Missed projections
First-quarter revenue grew 36% to $594.6 million, compared with $607.5 million projected by analysts. Earnings, excluding some items, were 15 cents per share, higher than the average estimate of 10 cents. The company's net loss narrowed to $79.7 million, or 12 cents per share.
"Revenue came in at the low end of our guidance range because brand marketers did not increase spend as quickly as expected in the first quarter," the company said in the statement. "We see a clear opportunity to increase our share of brand budgets over time."
Shares declined to a low of $15.75 in extended trading after gaining 3.8% to close at $17.75 in New York. The stock has lost 23% this year.
"The concern that dismal user growth would eventually affect revenue growth is starting to show up in Twitter's results," Jitendra Waral, a senior analyst at Bloomberg Intelligence, said in an e-mail. "Twitter experienced lower-than-expected brand-ad spending on its network. This doesn't bode well for investor faith in Twitter's revival plans for fixing its core product."
Difficult time
Twitter's the last few months have been turbulent. The company lost five of its top executives on one weekend in January, for example. Mr. Dorsey also added two new members to the board, replacing two directors who are set to leave when their terms expire later this year. Meanwhile, Mr. Dorsey is the boss of another public company, Square, and splits his time between the two offices, a block away from each other on San Francisco's Market Street.
Despite the shifts at the top of the company, Twitter has gotten clearer about explaining its purpose and its goals. Mr. Dorsey in January hired Leslie Berland from American Express to be its chief marketing officer, given the task of cementing Twitter's reputation as a place for live events. The company is prioritizing live video, and working to make content deals for streaming sports, political events and entertainment.
Earlier this month, Twitter agreed to pay $10 million to the National Football League for the rights to stream 10 Thursday night games during the 2016 season, people familiar with the matter have said.
Just as the company is settling on "live" as its priority, so are its bigger competitors. Facebook, which has five times the users, recently made it possible for any of them to live-stream directly on the network. Facebook also is emphasizing live news in its feed and search results. Snapchat, which has more than 100 million daily active users, has become a popular place to watch "live stories," which include video curated from its users.
Twitter is projected to draw 2.3% of the $102.5 billion mobile internet advertising market this year, according to eMarketer, behind Google, Facebook and Alibaba.
-- Bloomberg News
