May 11, 2021

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Twitter falls on the stock market after disappointing advertising revenue

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Posted on Apr 30, 2021, 5:16 PMUpdated on Apr 30, 2021, 6:43 PM

Twitter continues to grow, but fails to keep pace with its peers. During the first three months of the year, its revenue increased 28% year on year to $ 1.04 billion, while its net profit was $ 68 million. Its monetizable user base grew, as expected, by 20% to 199 million people.

The increase in turnover is much lower than that recorded this week by Facebook (+ 48% in one year), or by Google (+ 34%). The financial markets, disappointed, immediately sanctioned the title to the blue bird, which lost 13% of its value after the closure of Wall Street.

Attack on the Capitol

In a conference with analysts, Ned Segal, the chief financial officer of the social network, put forward several reasons for this disappointing growth. The attack on the Capitol by supporters of the outgoing President of the United States, Donald Trump, on January 6, led, according to him, some companies to temporarily withdraw their advertisements from the social network.

Brands tend to pause their advertising campaigns “when there is unrest, for whatever reason,” Ned Segal explained, lest their products go unnoticed by historical events. Advertising accounts for almost all of Twitter’s revenue: in early 2021, sales reached $ 899 million, up 34% from last year.

Small businesses vs big brands

But this isolated event only partially explains Twitter’s performance, which is lower than that of other tech groups. The social network mainly hosts advertisements from big brands, which represent 85% of its advertisers, while small businesses prefer Facebook and Google. During the pandemic, the latter have fallen back overwhelmingly to online sales, which explains the success of the two advertising giants.

On Twitter, the coronavirus crisis has caused an influx of new users, who are seeking information on the evolution of the epidemic. The latter are still active a year later, welcomed the CFO. To retain them, Twitter is seeking to develop new practices, including the possibility of following “subjects” – tech, football or the environment, for example – and no longer just people.

The Californian group is also working to deploy a new tool, called “Twitter Spaces”. Available for the moment on Android phone only, for a handful of users, this new feature will create audio chat rooms to exchange between users or listen to conferences. Twitter hopes to replicate the success of the Clubhouse network, which has attracted more than 10 million users.

One-year progress

Despite these disappointing results, the number of Twitter users has risen sharply since the start of the coronavirus pandemic, from 186 million last July to nearly 200 million. Even if this user growth is expected to slow in the coming quarters, Twitter nevertheless predicts a “double-digit” increase for the remainder of 2021. Its shares have also increased by 20% in one year.

During this period, the social network continued to recruit. It now has 6,100 employees, a fifth more than a year ago. At the same time last year, the company recorded a negative net result, due to a drop in turnover linked to the fall in advertising.

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