NEW YORK (REUTERS) - For all the buzz Twitter has created as the preferred platform for US President Donald Trump daily tweets, its desultory earnings report show a company with no evident path to profitability.
The company's in its fourth-quarter results released on Thursday (Feb 9) reported a loss of US$167 million compared with US$90 million a year before on flat revenues of US$638 million.
Trump's frequent outbursts helped increase the number of users by a modest 2 million to 319 million - but during this same period Facebook's grew by 72 million.
In a conference call with investors, its COO/CFO Anthony Noto admitted that although "the president's use of Twitter had broadened the awareness of how the platform can be used," it hadn't had any material impact on user growth or engagement.
Twitter has lost more than US$1.5 billion cumulatively since it went public in late 2013. Its core costs have climbed more quickly than revenue while user growth stagnates.
On Thursday Twitter said it was revisiting core advertising strategies, suggesting a quick turnaround on revenue was not likely. Fourth-quarter revenue of US$717 million was well short of analysts' expectations.
The company is "trapped" and could see declining revenue for another year or two, RBC Capital Markets analyst Mark Mahaney said in a client note.
"We believe that only a radical overhaul of the (user interface) and value proposition could potentially grow its user base, but such a step would carry enormous risk in alienating core users," Mahaney said.
Twitter's share price was battered on Thursday, closing down 12.3 per cent at US$16.41.
The company's revenue shortfall came even though its cost of revenue - the amount it must spend for hosting the service and sharing revenue with partners, among other things - rose by 40.4 per cent to US$306 million from a year earlier.
Meanwhile, revenue per user was US$2.25, a 3.4 per cent drop from a year earlier and far behind the US$7.16 in revenue per user that Facebook reported in the fourth quarter. With virtually no user growth, Twitter is spending more to generate less revenue per customer. The service has 319 million average monthly active users, compared to Facebook's 1.86 billion.
Twitter said it would reevaluate some kinds of advertisements that have not done well, such as so-called "direct response ads" where the goal is for consumers to respond right away.
That leaves the company chasing brand advertisers, but that could be a challenge, too, because those companies - from carmakers to soda sellers - plan six to 12 months in advance and have options, eMarketer analyst Debra Aho Williamson said.
"Figuring out brand advertising is something that Twitter needs to do," she said, "but it's going to take a lot of time to convince advertisers."
With additional information from Gizmodo