Twitter cuts 9 percent of workforce as it beats in Q3

Steven Loeb · October 27, 2016 · Short URL: https://vator.tv/n/47ee

The company posts revenue of $616M, EPS of 13 cents

The news surrounding Twitter has been pretty harsh lately, especially after the company seemed to come so close to being acquired, only to have all of its prospective bidders drop out, causing its stock price to crash. To put it mildly: Twitter needed a win.

On Thursday morning, that's exactly what it got, when it released its third quarter earnings, and beat easily.

The company posted revenue of $616 million, an increase of 8 percent year-over-year, above the $605.8 million expected by Wall Street. It reported non-GAAP EPS of $0.13, beating expectations of $0.9 a share.

Twitter also did well in the one area in which has consistently struggled: user growth. It reported that average monthly active users (MAUs) grew 3 percent year-to-year to 317 million for the quarter. They were also up from 313 million in the previous quarter.

Once again, almost all of Twitter's revenue during the last quarter came from advertising, totaling $545 million, an increase of 6 percent year-over-year. Mobile advertising revenue was 90 percent of total advertising revenue.

Data licensing, and other revenue, came to $71 million, an increase of 26 percent year-over-year. Of Twitter's total revenue, $242 million was international, an increase of 21 percent year-over-year.

The news wasn't all good, as Twitter is still not a profitable company. It posted a quarterly GAAP net lossf $103 million, or ($0.15) a share.

Twitter's stock is up slightly, rising 1.21 percent to $17.50 a share.

Job cuts

While the news for Twitter was pretty good overall, it's tempered a bit by the fact that the company also announced it is laying off 9 percent of its staff, or 350 people.

Reports began to surface earlier this week that the number would be closer to 8 percent, or 300 workers.

The job cuts come amid a restructuring, which the company says "focuses primarily on reorganizing the company's sales, partnerships, and marketing efforts."

The sales team will be hit particularly hard by these cuts, as the company revealed that it will be cutting down from three sales channels to two.

"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," Anthony Noto, Twitter's CFO, said in a statement. 

"We intend to fully invest in our highest priorities and are de-prioritizing certain initiatives and simplifying how we operate 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."

This kind of cut is not unprecedented for Twitter. In October of last year, newly minted CEO Jack Dorsey, revealed that the company would be cutting 336 jobs, or 8 percent of its global workforce. 

That was the first mass layoff in Twitter's entire history. Now it's about to see its second. 

(Image source: wired.com)

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What is Twitter?

Twitter is an online information network that allows anyone with an account to post 140 character messages, called tweets. It is free to sign up. Users then follow other accounts which they are interested in, and view the tweets of everyone they follow in their "timeline." Most Twitter accounts are public, where one does not need to approve a request to follow, or need to follow back. This makes Twitter a powerful "one to many" broadcast platform where individuals, companies or organizations can reach millions of followers with a single message. Twitter is accessible from Twitter.com, our mobile website, SMS, our mobile apps for iPhone, Android, Blackberry, our iPad application, or 3rd party clients built by outside developers using our API. Twitter accounts can also be private, where the owner must approve follower requests. 

Where did the idea for Twitter come from?

Twitter started as an internal project within the podcasting company Odeo. Jack Dorsey, and engineer, had long been interested in status updates. Jack developed the idea, along with Biz Stone, and the first prototype was built in two weeks in March 2006 and launched publicly in August of 2006. The service grew popular very quickly and it soon made sense for Twitter to move outside of Odea. In May 2007, Twitter Inc was founded.

How is Twitter built?

Our engineering team works with a web application framework called Ruby on Rails. We all work on Apple computers except for testing purposes. 

We built Twitter using Ruby on Rails because it allows us to work quickly and easily--our team likes to deploy features and changes multiple times per day. Rails provides skeleton code frameworks so we don't have to re-invent the wheel every time we want to add something simple like a sign in form or a picture upload feature.

How do you make money from Twitter?

There are a few ways that Twitter makes money. We have licensing deals in place with Google, Yahoo!, and Microsoft's Bing to give them access to the "firehose" - a stream of tweets so that they can more easily incorporate those tweets into their search results.

In Summer 2010, we launched our Promoted Tweets product. Promoted Tweets are a special kind of tweet which appear at the top of search results within Twitter.com, if a company has bid on that keyword. Unlike search results in search engines, Promoted Tweets are normal tweets from a business, so they are as interactive as any other tweet - you can @reply, favorite or retweet a Promoted Tweet. 

At the same time, we launched Promoted Trends, where companies can place a trend (clearly marked Promoted) within Twitter's Trending Topics. These are especially effective for upcoming launches, like a movie or album release.

Lastly, we started a Twitter account called @earlybird where we partner with other companies to provide users with a special, short-term deal. For example, we partnered with Virgin America for a special day of fares on Virginamerica.com that were only accessible through the link in the @earlybird tweet.

 

What's next for Twitter?

We continue to focus on building a product that provides value for users. 

We're building Twitter, Inc into a successful, revenue-generating company that attracts world-class talent with an inspiring culture and attitude towards doing business.