Retailers’ holiday advertising campaigns didn’t help Twitter Inc.’s bottom line in the fourth quarter as the social network’s advertising revenue fell slightly in the fourth quarter. This marks the first time the social network has failed to post a year-over-year gain.
“2016 was a transformative year for us,” said CEO Jack Dorsey today during a conference call with analysts. “Transformations are difficult, and this one was especially challenging.”
Part of the social network’s problems have stemmed from its inability to attract new users; Twitter added 14 million new users in all of 2014, including just 2 million in the fourth quarter.
Moreover, some of the ad formats that appeal most to advertisers such as online retailers—including those that seek to drive a direct response, such as a click to a merchant’s website—have failed to resonate with the social network’s users. Among those failed formats was Twitter’s Buy button, which it began to pivot away from last May and officially killed in January.
Twitter writes in its letter to shareholders:
“Revenue from our direct-response ad formats, on the whole, declined on a year-over-year basis in the fourth quarter due to decreases in our owned-and-operated mobile application download and website click ad formats. We haven’t made the progress we anticipated over the last year in some direct-response ad formats, both in terms of improvements to existing product features as well as the impact of new product features. We have also seen increased competitive pressure resulting in a decline in our original promoted tweet engagement ad format.” Promoted tweets are the social network’s ad format that enables an advertiser to pay to ensure a post receives a set number of impressions.
For the fourth quarter ended Dec. 31, Twitter reported:
- $637.8 million in ad revenue, down 0.5% from $640.7 million a year earlier.
- $717.2 million in total revenue, up slightly from $710.5 million. Mobile advertising accounted for 89% of advertising revenue, or about $567.6 million. That’s roughly a 3% gain from an estimated $551.0 million in mobile advertising revenue a year earlier.
- 319 million monthly active users, up 4.5% from 305 million in the same period a year earlier, and up slightly from 317 million in the third quarter.
- $167.1 million net loss compared with a $90.2 million loss a year earlier.
For the full year, Twitter reported:
- $2.248 billion in ad revenue, up 12.7% from $1.994 billion.
- $2.530 billion in total revenue, up 14.1% from $2.218 billion a year earlier.
- $456.9 million net loss compared with a $521.0 million loss a year earlier.