Twitter starts growing again (slowly): 5 million new active users in Q1 2016

Twitter ($TWTR) today released the results of its Q1 2016 earnings, revealing that it saw $595 million in revenue. This was attributed to the slow down in the lack of spending by brand marketers compared to what the company expected.

But the interesting part was with its user growth — Twitter saw 310 million monthly active users, a mere 3 percent annual increase, excluding SMS fast followers — Twitter doesn’t account for them in its filings anymore. This is up from the 305 million it reported last quarter. While this is the beginning of the upward momentum Twitter perhaps hoped for, it’s still slow moving.

User growth okay, but financials not so much

From a financial standpoint, Twitter has failed to meet Wall Street’s expectations. The company had been expected to bring in $607.84 million in revenue, but only generated $595 million, a 36 percent annual increase. Much of that amount ($531 million) came from advertising, while the rest were from data licensing and other sources.

Twitter’s stock closed up 3.86 percent for the day at $17.75 and is currently down 11.21 percent in after-hours trading.

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A key metric shareholders, analysts, and the media have been paying close attention to this quarter is the company’s user numbers. Last quarter, it reported 320 million users (including SMS fast followers), the first time that it hasn’t seen any growth, something that is very worrisome. 83 percent of the Q1 2016 monthly active users were on mobile devices.

On the advertising front, Twitter said that video spending “largely replaced” other Promoted Tweet spend. “We’re hearing from marketers that growth in overall video spend on Twitter will be driven by tapping into incremental online video budgets, which in turn requires us to provide a set of additional features including more detailed demographic targeting and verification, and reach and frequency planning and purchasing,” the company wrote.

Twitter revealed that it will also be expanding its Promoted Video program in Periscope in Q2 2016 to help brands reach a wider audience on the network. It has also signed a Fortune 50 company to advertise during the livestreaming broadcast of the NFL’s Thursday Night Football games, with “many more expected in the coming months.”

In August, the company acquired ad tech service TellApart and has been slowly integrating it into the Twitter platform to power its dynamic product ads. It’s reported that now there’s a 2x lift in both clickthrough rates and conversions and there are plans to open up this ad type to more marketers next quarter, making it available through the Ads API partners. Additionally, Twitter will be retiring the TellApart brand later this year after absorbing the ad tech service’s engineering, product, and business functions.

The move for user engagement

This is the first quarter since Twitter laid out its updated long-term strategy, which centers around refining the core service, livestreaming video, creators and influencers, safety, and developers. “Each is critical to strengthening our platform and audience around live,” the company wrote in its investor letter.

In the past several months, the company has made some in-roads in pursuing this event strategy, including striking a deal with the National Football League to stream Thursday night games in full, beating Facebook for the rights. And as Twitter looks to boost user engagement, it has implemented new features, such as tweaking its timeline to surface the most interesting and popular tweets instead of displaying them in reverse-chronological order — which Twitter said only 2 percent have opted-out of, made it so videos can be created and shared through direct messages, added native GIF support, and even integrated Google’s AMP articles into Twitter Moments.

Twitter has been on a steady evolutionary (can we call it that?) path since Dorsey returned as CEO, making changes in not only its leadership over and over again, but also within the company’s Board of Directors. While Dorsey says product changes are coming, how much longer will shareholders wait before their patience is gone?

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