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Twitter’s subpar earnings raise questions about acquisition, Dorsey’s future

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Jack Dorsey/JD Lasica/Flickr
Has Twitter CEO Jack Dorsey shipwrecked the beloved platform he helped create? Following another quarter of disappointing results, which saw the company miss revenue expectations, all eyes are now trained on the Twitter chief. Will he abandon ship? Or, as so many analysts have suggested, shop around for an acquisition or merger?

Nestled within Twitter’s letter to shareholders there were some glimmers of hope. The company’s revenue grew 20 percent year-over-year to reach $602 million, although it still came in below Wall Street’s expectations of $607 million.

As was the case in the previous quarter, Twitter’s advertising is partly to blame. Despite seeing ad revenue hit $535 million, an 18 percent increase year-over-year, Twitter claims that it saw “less overall advertiser demand than expected,” a worrying trend that could continue into the third quarter.

Regarding the future, Twitter’s outlook has consequently taken a hit, with the company expecting revenue to be in the range of $590-610 million. That’s well below analysts’ expectations of $670 million. Wall Street is reportedly shocked by the overall figures, which represent Twitter’s slowest quarterly revenue growth since the firm went public.

Dorsey can’t have been too surprised by speculation mounting over a prospective Twitter buyout. Faced with the question, he remarked that the platform is a “service of importance” with “so much farther to go.” The statement aligns with the general message in the company’s letter to shareholders, which fundamentally asserts that Dorsey’s vision still needs time to come to fruition.

The strategy, as outlined by Twitter, includes its big bet on live-streaming, which Twitter believes can bring in lucrative video advertising dollars. A new marketing campaign, launched yesterday, also puts the emphasis on the platform’s live news credentials. Combined with its focus on real-time video, Twitter evidently believes that it can attract users by encouraging spectatorship over participation. Other upcoming changes, that will affect Twitter’s more active users, include an uptick in notifications in regards to breaking news events.

The quarter itself, on the other hand, saw little signs of life in regards to user growth. Twitter added 3 million users to reach a total of 313 million monthly active users, a pallid increase of just 3 per cent year-over-year.

In comparison, Twitter’s rivals (including Facebook, Instagram, and Snapchat) have gone from strength to strength, particularly in regards to mobile advertising revenue, and user growth. Twitter is asking for patience, but after a year at the helm, many feel Dorsey has failed to deliver. One thing is for sure, time is no longer on his side.

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