Twitter has spent more time in the last few years projecting success than actually achieving it, so when it announced a net profit of $91.1 million for Q4’17, investors sat up and started paying attention.
This was a drastic turn-around from the $167.1 million loss the year prior. What’s changed at the lukewarm social media network with the big blue bird?
Moving Into the Black Again
There was a time when Twitter was a force to be reckoned with.
It was a hard call if Twitter or Facebook would be the dominant species of social media. Then Twitter went public in November 2013, and things slowly got worse and worse for the platform. Although it had projected a goal of profitability in 2017, hope was hard to find by the time that long mark had been reached.
But low and behold, Twitter did it and by achieving this goal, may have literally risen from the dead. Investors sent Twitter stock soaring on the announcement of profitability, ultimately increasing the stock’s value by 12 percent, to $30.18 per share (its highest close in over two years). Despite the rocky road it has traveled with losses of partners like the National Football League, Twitter is seeing a small surge of about 12 percent in daily users year over year.
But Can Twitter Make This Success Last?
Twitter’s dirty secret is that it largely achieved profitability by cutting costs.
A 28 percent drop in expenses, largely via a reduction of stock-based compensation, was responsible for much of the increase in profits. In reality, revenue only rose two percent, to $731.6 million, though this was better than the three quarters prior when there were nothing but declines. Still, revenue in the US was still down eight percent. Ad revenue was up just one percent.
Wall Street may be eager to embrace the Great Twitter Comeback, but the bigger picture tells a story of a company that’s still barely holding on. Even Twitter’s CEO Jack Dorsey isn’t exactly promising miracles. He told reporters at The Wall Street Journal that investments in 2018 would likely result in expenses that align with revenue — in short, this profitable quarter is probably an anomaly, but they’re going to take the money and try to make it make more.
To its credit, the team at Twitter intends to invest in fixing some of the biggest problems with the platform, including abusive activity by spam accounts and other hostiles.