Twitter is doubling down on its core after months of worries that the microblogging site is in the midst of an identity crisis.
Twitter said Thursday morning it would be cutting 9 percent of its global workforce, or 350 jobs, to zero in on key priorities. Hours later, the firm demonstrated a new TV-watching integration with Apple TV at Apple’s Cupertino headquarters that links live TV with interactions from Twitter, building on Twitter chief executive officer Jack Dorsey’s ongoing emphasis on video and live events.
The job cuts and restructuring at Twitter are primarily in the company’s sales, partnerships and marketing departments. “We’re getting more disciplined about how we invest in the business, and we set a company goal of driving toward GAAP profitability in 2017,” said chief financial officer Anthony Noto. “We intend to fully invest in our highest priorities and are de-prioritizing certain initiatives and simplifying how we operate in other areas.”
Investors took a wait-and-see approach and the stock inched up 6 cents to $17.35 in midday trading on Wall Street.
As part of its restructuring, Twitter is consolidating its three sales groups into two. The sales groups aimed at brand advertisers and at direct response advertisers will be merged while the group directed at small businesses will remain separate. EMarketer principal analyst Debra Williamson said that this is an acknowledgment that brand advertising “is what’s driving the bus for Twitter. The company has tried to build compelling ad products for direct response companies, but it has had less success there,” Williamson said.
In recent years, experts have questioned a bloated workforce and various efforts to expand the service, while the core purpose of Twitter — a global town square — has barely changed. Meanwhile, user growth has stalled as Twitter struggles to build advertising revenue.
Average monthly active users in the quarter were at 317 million, which represents a 3 percent increase in the past year. Average daily active usage is improving slightly faster, at 7 percent year-over-year growth, an acceleration from 5 percent and 3 percent in the two previous quarters.
Twitter posted revenue of $616 million for the quarter, which represents an 8 percent increase from a year ago. Advertising revenue, which was mostly from mobile advertising, was $545 million in the quarter, which is up just 6 percent compared to a year ago, and grew mostly with international advertisers.
“The sales, partnerships and marketing departments are primarily responsible for working with marketers to sell data and advertising and create bespoke sponsorships,” said Forrester analyst Melissa Parrish. “Whenever revenue is lacking, people get concerned if sales staff is reduced; but in this case, it was clear Twitter had been spending less on research and development and more on administrative and overhead. To me, the move today suggests that they understand this was out of balance and that they need to improve their core products.” And, she added, they’ll need their considerable engineering and product talent to do so.
Twitter recently has invested in a number of tools to encourage “creators” to share more often, has added features that sort through the content and recommend items even to non-members and has experimented with a buy button that has largely fallen flat.
Williamson said that Twitter’s efforts in e-commerce have been a challenge, noting that Nathan Hubbard, who led e-commerce, left in May 2016. “Although the company had some successes in getting people to transact on the Twitter platform, ultimately it became clear that that wasn’t going to be a big business for Twitter,” she said.
Since then, Twitter has been emphasizing its role as a news-gathering platform with ad campaigns, and has most recently been pushing its positioning as a video platform and a customer service tool. Twitter has begun live-streaming events, such as sporting events and political debates, which are traditionally been among the key topics around which users digitally congregate. And at today’s Apple event, Twitter embraced its long-standing function as a second screen by introducing a “unified TV experience.”
This means that when Apple TV users are watching live events, a live Twitter stream will appear to the right of the screen, showing, for example, Tweets from athletes and stats from journalists, or highlights from Periscope.
Twitter is also leaving another part of its video strategy behind and said it would be discontinuing the Vine app, a short-form video sharing service that Twitter acquired in October 2012, shortly after it was founded.
Noto said that if and when business improves, Twitter would potentially look into investing in other areas. “Over time, we will look to invest in additional areas, as justified by expected returns and business results. In addition, our live strategy is showing great progress. We’ve received very positive feedback from partners, advertisers and people using the service, and we’re pleased with the strong audience and engagement results.”
Parrish also pointed out a small mention during today’s call of the problem of abuse on the platform. “If the product and policy updates they release next month help get that under control, it will go a long way to attracting new users and keeping some of their most high-profile ones,” she said.
Dorsey, who as of yet has failed to attract a buyer for Twitter, said the company’s strategy is focused on driving audience and engagement growth. “We see a significant opportunity to increase growth as we continue to improve the core service. We have a clear plan, and we’re making the necessary changes to ensure Twitter is positioned for long-term growth. The key drivers of future revenue growth are trending positive, and we remain confident in Twitter’s future.”