It took them a while but Twitter seems to have finally figured out how to make money. The social media company reported its second straight profitable quarter — which also happens to be the second profitable quarter in company history — as it shared its earnings report for the first three months of 2018 (Q1 2018). Twitter reported total revenue of $665 million up 21% YoY from the same quarter last year. More crucially though the company registered a net profit of $61 million. While both those number are lower than the previous quarter where Twitter raked in a profit of $91 million and total revenue stood at $732 million, the company did beat market estimates.
Twitter also saw a growth in the number of monthly active users (MAUs) as it added 6 million new users in Q1 2018 to bring the total up to 336 million. That means that monthly active users are up 3% YoY. Users numbers had remained flat the previous quarter (0% growth) as Twitter had expanded its efforts to reduce spam, malicious activity and fake accounts. The company also reported that its daily active user base grew 10% YoY, its sixth straight quarter of double-digit growth. But the caveat here is that Twitter doesn’t reveal how many users are active daily, so it’s difficult to put the growth numbers into perspective.
Profitability was one of the company’s main goals in 2017. To achieve this it laid off 9% of its workforce in late 2016, and then sold off its developer business and shut down its video app Vine.
Note of caution
Despite the better than expected numbers, Twitter’s stock was down 2.36% as markets closed for the day. This drop is being attributed to a statement from the company’s earnings letter (which was echoed on the call with analysts): “Total revenue for the remainder of 2018 will resemble the sequential growth rates for total revenue in 2016.” Twitter’s sequential revenue growth in Q2 and Q3 2016 was just 1% and 2% respectively. That’s quite a poor forecast for the rest of the year. Turning a profit remains critical for Twitter even if it is a small profit, these projections will make that harder.
The company has spent years battling slow users growth with numbers not being able to breach the 350 million mark, this has hampered the company’s stock. The company has struggled with a number of other issues over the past few years including harassment and targetted abuse of users, fake accounts and not to mention the perpetual problem with new users being unsure of how to use its network. Product changes have been slow; and despite major investments in video, Twitter Video is a tiny blip on the radar.
Facebook in a different stratosphere
More than ever before Facebook needs a competitor now, and Twitter may be its biggest competitor in the social media space, but Facebook, which also shared its quarterly result today, showed numbers that put it in a completely different stratosphere. Facebook posted total revenues of $12 billion for Q1 2018, up 49% year-on-year (YoY) from $8 billion in Q1 2017. Advertising revenue contributed 98.6% or $11.8 billion of total revenues, while payments and other fees contributed $171 million.
Facebook’s strong number come amidst multiple controversies that have hit the company in the past three months primarily centering around the unconsented access of data from 87 million users by Cambridge Analytica that was then used to serve targeted political ads. The controversy led to condemnations from global leaders and Facebook CEO Mark Zuckerberg was made to appear before Congress. When Senator Lindsey Graham asked Zuckerberg to name his biggest competitor, the Facebook boss couldn’t clearly name one. When pushed to name companies Zuckerberg named “Google, Apple, Amazon, and Microsoft.” There was no mention of Twitter at all.