Twitter is profitable, but one of its key metrics still has room to improve

Twitter has just seen its stocks skyrocket 25% after announcing Q4 2017 earnings. The microblogging site increased its revenue by 2% year-on-year to $732 million.

The company’s net income was $91 million. Overall, the results are rather encouraging – especially after Twitter faced a net loss of $167 million in Q4 2016.

 “Q4 was a strong finish to the year,” said CEO of Twitter, Jack Dorsey. “We returned to revenue growth, achieved our goal of GAAP profitability, increased our shipping cadence, and reached five consecutive quarters of double digit DAU growth. I’m proud of the steady progress we made in 2017, and confident in our path ahead.”

Despite the positive results, Twitter’s monthly active user (MAU) base seems to be stagnating between quarters. For the second quarter in a row, MAUs were 330 million. At the same time, this represents a slight increase of 12% from Q4 2016.

Meanwhile, daily active users jumped 12% during the quarter.

Twitter said that the inactivity of its user base was likely due to changes introduced to the Safari app as well as efforts to increase bot removal across the platform. The company said it lost two million monthly users due to the changes.

Advertising revenues grew by just 1% to $644 million, driven by stronger engagements and improved revenue products. Overall, ad engagement rates were up 75% compared to Q4 2016. Cost per engagement dropped 42%.

The company explained that video represented the largest format with Video Website Cards, Video App Cards, InStream Sponsorships, and In-Stream Video Ads. Live events and Instream Video Ads are also popular among premium advertisers.

“Twitter’s strong quarter is a clear reflection of brands steadily increasing their investment to capitalise on multi-screen marketing,” said Aaron Goldman, chief marketing officer of 4C Insights. “Twitter has become the de facto place for the world to react to news, politics, sport, TV, weather and more. As such, it’s a great aperture for brands to deliver timely messages to targeted audiences. We are seeing this momentum carry over into Q1 with major tentpole events like the Golden Globes, Grammys, Super Bowl, Winter Games, and the Oscars.”

Meanwhile, eMarketer estimates that Twitter total advertising revenue will drop 1.5% in 2018 to $2.04 billion. However, mobile ad revenues are increasing by 0.7% to $1.87 billion.

In 2018, a whopping 92% of the company’s revenue is coming from mobile devices with the remainder attributed to desktops.

When it comes to user base, the research company suggests that Twitter’s total user base will grow 3% in 2018 to 270 million.

 “It doesn’t yet appear that Twitter has found the secret to success in video yet. It’s fighting an uphill battle to attract consumers’ attention, since video is also a priority for Facebook, Snapchat and others. I’ll be looking for signs of momentum in viewership of video programming, such as Bloomberg’s new Twitter-based network,” said eMarketer’s principal Analyst, Debra Aho Williamson.