INTERNATIONAL - Twitter Inc. reported quarterly revenue and gave a sales forecast that fell far short of Wall Street’s estimates, saying privacy issues involving its advertising business will continue to weigh on its performance. The shares plunged.
Third-quarter sales increased 8.6% to $823.7 million, well short of the $876 million analysts estimated. Sales in the period ending in December will be $940 million to $1.01 billion, the San Francisco-based company said Thursday in a statement. Analysts projected $1.06 billion.
In a letter to shareholders, the social-media company blamed “greater-than-expected advertising seasonality” in July and August for the third-quarter results, and also referenced “revenue product issues” that reduced sales by 3 or more percentage points.
In a blog post last quarter, Twitter outlined two settings issues that let the company access user data without permission to show targeted ads or measure the success of those ads for marketers. Removing that data from the advertising arsenal hurt the company’s business.
Twitter reported profit, excluding some items, of 17 cents a share, compared with analysts’ estimates of 20 cents.
User growth, on the other hand, provided a positive note for Twitter, which has historically struggled to increase its audience despite widespread social and cultural awareness. The company added 6 million new daily active users to 145 million in the third quarter, a 17% increase from a year earlier and a 4% gain from the previous quarter.
“Despite its challenges, this quarter validates our strategy of investing to drive long-term growth,” Chief Financial Officer Ned Segal said in a statement. “More work remains to deliver improved revenue products. We’ll continue to prioritize our ad products along with health and our investments to drive ongoing growth” in monetizeable daily active users.
Twitter’s user growth has fueled a share increase of 35% this year to $38.83 through Wednesday’s close in New York. The shares plunged 15% in early trading after the results, dragging down Snap Inc. as well. The Snapchat parent reported a strong third quarter earlier this week but gave a tepid forecast for the current period.
Chief Executive Officer Jack Dorsey has been making a concerted effort to clean up the service and make it easier for users to have conversations with one another. One of Twitter’s top product initiatives is to help people find more content that they might find interesting, even if they don’t know which specific users they should follow. The company started testing the ability for users to follow specific topics last quarter, like sports or gaming. It will continue that test, with plans to add more categories such as celebrities and television shows moving forward.
The effort is aimed at one of Twitter’s biggest issues, which is helping new and existing users find new content outside of their existing network.