Twitter to slash jobs as revenue growth slows

Twitter will shut down its Vine video app after another loss and another quarter of slowing revenue growth.

Twitter will cut 9 per cent of its workforce worldwide. Picture: AP Photo/Richard Drew.

Twitter on Thursday said it would slash 9 per cent of its workforce and redirect its focus from driving growth to delivering profits, an about-face following the retreat of several potential acquirer including Salesforce.com

The cost-cutting moves, which include shutting down its Vine video app, come as Twitter reported dwindling revenue growth for the third quarter and another loss over $US100 million. Revenue rose just 8.2 per cent, compared with over 50 per cent growth in the year-ago quarter.

The social-media company is cutting around 350 jobs, largely in its sales, partnerships and marketing organisation. Twitter said it would whittle down its sales channels from three to two and pull the plug on Vine, the six-second looping-video app acquired in 2012.

Twitter executives said the company has set a goal for next year of “driving toward” profitability in 2017. The company has posted quarterly net losses since going public in 2013, though they have narrowed each quarter this year. In the latest period, the loss shrank by 22 per cent and beat expectations.

“We’re getting more disciplined about how we invest in the business,” Chief Executive Jack Dorsey said during a conference call with analysts. “We’ve fully funded our most critical initiatives.”

Twitter’s losses ballooned to well over $US100 million per quarter after it went public, largely because of stock awards given to new hires. As a percentage of revenue, Twitter’s stock-compensation costs totalled about 26 per cent, among the largest for companies with $US1 billion or more in annual revenue.

SunTrust Banks analyst Bob Peck previously said a cut of 8 per cent would save Twitter as much as $US100 million a year.

Twitter’s results follow weeks of frenzied reports that the company was fielding acquisition offers from Salesforce.com, Walt Disney Co. and Google parent Alphabet — only to have them all walk away earlier this month. Analysts don’t expect another round of takeover interest soon.

During the call, Mr Dorsey addressed the acquisition interest by saying the board was focused on maximising shareholder value and wouldn’t comment further on the deal rumours.

The lack of a deal puts added pressure on Mr Dorsey to reinvigorate revenue and user growth through a series of product changes and advertising initiatives. Since he took over as permanent CEO about a year ago, Twitter’s user growth has fluctuated between zero and the third quarter’s 1.7 per cent. Twitter added 4 million monthly active users in the latest three months to give it 317 million.

Twitter’s third-quarter revenue gain of 8.2 per cent was its smallest and marked the ninth straight period of slowing growth. The $US615.9 million reported did surpass analysts’ expectations of $US606 million.

As Twitter’s woes continue, bigger rivals like Facebook have pulled further ahead while smaller upstarts like Snapchat, Instagram and Pinterest are quickly gaining ground. Pinterest said this month it now has 70 million monthly users in the US, more than Twitter’s 67 million.

“Twitter has gotten caught up in a conversation about slower growth and earnings,” said Adam Berke, president and chief marketing officer of AdRoll, which helps advertisers build ad campaigns on sites including Twitter and Facebook. “Even though that’s often unrelated to the effectiveness of their ad product, it affects their perception in the market as an interesting option.”

Executives told analysts during the call that it would double down on its video strategy. Twitter has banked on a push to live-stream premium content such as National Football League games and the recent presidential debates. Twitter struck a $US10 million deal with the NFL to broadcast Thursday night games, offering ad packages of up to $US8 million for the season.

In the first seven games under the partnership through last week, Twitter has attracted an average audience of more than 200,000 viewers. Only two of the 10 Thursday night NFL games it acquired the rights to stream took place in the third quarter.

More than bringing in new ad-revenue opportunities, Twitter executives hope its live-streaming content will help broaden its user base to mainstream users — namely, those who haven’t understood the purpose of Twitter — and increase engagement on the platform as people tweet about the games and shows being broadcast.

Morgan Stanley analysts project the NFL deal will generate just $US11 million in incremental ad revenue in the fourth quarter.

Twitter said it wouldn’t provide a revenue outlook for the fourth quarter as it digests the effect of its restructuring. The company expects to incur cash costs of $US10 million to $US20 million, as well as stock-based compensation expense of $US5 million to $US10 million associated with the job cuts, with most of the related charges coming in the fourth quarter.

Dow Jones