Twitter Share Price Drops 10% Due Falling Revenue Forecast

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Twitter Share Price Drops 10% Due Falling Revenue Forecast

Shares in the social media giant Twitter fell by 10% following the company’s reduced revenue forecast for 2019 which was announced in early February. It’s expected that first quarter revenues for this year will be $715mn to $775mn lower than originally predicted.

Twitter Revenue Forecasts

Although Twitter reported $255mn (£197mn) in profits for the last quarter of 2018, the company’s report that revenues for the first quarter of 2019 will be reduced has made markets jittery. The company reported that operating costs may increase by up to 20% for 2019 as well.

The profits announced for the final quarter of 2018 were a massive hike on the $91mn profit announced for the same period in 2017 and are due to increased advertising revenues. A lot of this revenue growth is down to the growing popularity of video advertising which helped ensure a 24% hike in revenues to $909mn for the quarter.

Chief Executive of Twitter, Jack Dorsey, commented: “2018 is proof that our long-term strategy is working. We enter this year confident that we will continue to deliver strong performance by focusing on making Twitter a healthier and more conversational service.

Higher Costs

Twitter’s announcement of higher costs through 2019 is unlikely to have taken account of current pressures on social media providers to provide better policing of their site content.

Several recent issues relating to user privacy, mental health conditions, user privacy, hate speech and campaigning have led to increased political and social pressure on all the major social media providers. Twitter has already removed several million abusive user accounts in clean-up attempts and this has resulted in an overall drop in monthly users.

Daily Users

There are around 321mn user accounts on Twitter at present, which is a reduction of almost 9mn on figures for the year before. Twitter will no longer be announcing statistics for its monthly active users and is planning to switch to reporting daily user activity.

The final quarter of 2018 saw an increase in daily users of 1.6%, to give a total of 126mn users altogether. This is lower than daily users for some of the other social media giants, for example Facebook has around 1.5bn daily users and Snapchat has 186mn.

Clement Thibault, an analyst at the financial platform Investing.com, commented: “Total user numbers are down, but we’ve known for a while now that Twitter has a fake-users problem and is trying to deal with it, so that shouldn’t come as a surprise to anyone. Higher operating expenses, on the other hand, are a bigger problem, as I anticipate Twitter’s margins and profits to shrink considerably in 2019.