(Bloomberg)—The first quarter offered some signs of optimism for Twitter Inc. and Snap Inc., both of which have struggled to grow their user bases.
Twitter Inc. first-quarter sales projections and reported strong user growth, bolstered by changes to its social-media service that are drawing a wider audience of consumers and advertisers.
The San Francisco-based company reported $787 million in revenue, an 18% increase from the year-earlier period. The largest share of that revenue, $679 million, stemmed from advertising, which also grew 18%. The microblogging site also posted an increase in monetizable daily active users to 134 million, beating analyst predictions for about 128.4 million. That compares with 126 million in the fourth quarter.
Twitter shifted focus to daily users for the first time in the December quarter, arguing that it’s a more meaningful metric than monthly visitors because the company aims to drive people to the service every day. CEO Jack Dorsey has been escalating efforts to rid the site of toxic content amid heightened concerns that social media companies have failed to curb the exploitation of personal data, election meddling and hateful posts. Having long been criticized for relying on users to report abuse, the company recently said some 38 percent of abusive content is now being found through technology and flagged for human review, up from none last year.
Rich Greenfield, an analyst at BTIG, said the increase in monetizable daily active users was the largest in the past four years, “clearly illustrating that the product improvements and health initiatives are resonating with consumers all over the world.”
Monthly active users were 330 million in the first quarter, Twitter said. That was up from 321 million in the previous quarter, but marked a decline from the 336 million in the year-earlier period. That number has been decreasing year over year for several quarters, and Twitter told investors in 2018 that the metric would likely continue to drop for some time as it removes spam and suspicious accounts. Twitter said this is the last time that it will disclose monthly active users.
Still, Twitter is ending reporting of that metric “on a high note,” with monthly active users rising quarter over quarter for the first time since at least early 2018, noted Jasmine Enberg, an analyst at EMarketer. Twitter’s shift to monetizable daily active users is “in keeping with its value proposition to advertisers—a committed though not very large user base when compared with other social platforms,” she said.
Twitter, which has a history of being slow to make changes to its service, has recently increased the pace of new product introductions. Last month it opened access to its prototype app, called twttr, to test new ideas and get feedback. The company is also rolling out a Snapchat-like camera feature that lets users post videos or photos in a swipe. The prototype app and iterations are part of the company’s efforts to make Twitter easier to use and feel more like a chat service, with fluid conversations.
Net income in the first quarter rose to $190.8 million, or 25 cents a share, from $61 million, or 8 cents, a year earlier. Profit excluding certain items was 37 cents a share, compared with the average analyst estimate of 15 cents. In last year’s first quarter, revenue was $665 million.
Snap Inc. reported first-quarter results that exceeded already high expectations, giving investors another reason to be optimistic for a revival of the social-media company.
The parent of photo-messaging app Snapchat said sales rose 39% from the previous year, to $320 million for the three months ended March 31. Analysts had projected revenue of $307.4 million. The Santa Monica, California-based company also saw more users flock to the platform from the previous quarter, the first increase in that metric in four quarters. Snap reported 190 million people used the app daily, compared with 186 million in the fourth quarter. There were 191 million daily active users in the same period last year.
Earlier this month, CEO Evan Spiegel announced a slew of new products and services, including an expanded advertising network, improved augmented reality and camera features, a new video-game service and original shows. Analysts cheered the news, which was seen as encouraging people to spend longer on the site.
Snap still faces long-term uncertainties around the ability to significantly expand users and fend off competition, let alone turn a profit. It’s also reeling from a string of executive departures and is still in search of a new chief financial officer.
The company’s net loss narrowed from a year earlier to $310.4 million from $385.8 million. Excluding certain items, the loss was 10 cents a share, smaller than the 12 cents per share loss predicted by analysts.
Snap said second-quarter sales will be $335 million to $360 million, compared with an average analyst projection for revenue of $348 million, according to data compiled by Bloomberg.