Twitter shares spike as tweaks to service drive profit jump

Twitter shares surged 16pc after it reported record daily users and rising profit.

Shares in Twitter rose 16 per cent yesterday. Picture: AP

Twitter has reported record daily users and rising profit, driving shares higher as the results signalled that recent product tweaks are stabilising the business.

Shares in Twitter rose 16 per cent yesterday amid news of the company’s improved performance, including better-than-expected revenue growth.

The results indicate that Twitter chief executive Jack Dorsey’s long-promised plans to address harassment on the platform are paying off, and that its niche community of social-media users can sustain a profitable business.

The social-networking company said daily users — a metric it started disclosing with its previous earnings report — rose 6 per cent in the first quarter to 134 million from 126 million in the previous three months, driven primarily by strength in international markets. Those figures are a fraction of Facebook’s users and smaller than the user total at unprofitable Snap, yet Twitter has managed to build a business around them that has now been profitable for six quarters in a row after years of losses.

Twitter’s number of monthly users also rose, to 330 million, from 321 million the previous quarter. The company added that this is the last quarter it will disclose monthly user data. It said in the fourth quarter that it was switching to the daily user metric because it wants to build a product that people use every day.

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Net income in the first quarter increased to $US191 million, from $US61m a year earlier. Twitter said it benefited from one-time factors, such as not having to make an expected tax payment, and that it pushed investments in some projects out to future quarters.

Revenue rose 18 per cent to $US787m in the first quarter, up from $US665m a year earlier. The result was a sequential decline from the fourth quarter, which is typically the heaviest spending period for advertisers, but topped analyst projections of $US774m, according to FactSet.

“They’re doing what they’re supposed to do,” said Wedbush analyst Michael Pachter. “They’re growing revenue and controlling operating expenses.”

Central to Twitter’s changes is an effort to promote healthy discourse, after the company has struggled to rein in toxic behaviour. It has also been working to make the platform more conversational.

After its launch in 2006, it was lauded as a platform for social change, when revolutionaries in Arab countries used Twitter to co-ordinate their protests and communicate what was happening to the outside world. More recently, it was slow to react when other users — particularly women and minorities — reported facing harassment and abuse on its platform. Those issues drove many users from the website.

Mr Dorsey told analysts on Tuesday that the company is now taking a more proactive approach to addressing abuse and its effects on the platform.

Twitter has made changes that are “taking a bunch of the burden away from the victims of abuse and harassment on our service and we’re making the agents that we have working on this process much more effective and much more efficient,” Mr Dorsey said.

Earlier this month, Twitter said it was using machine-learning algorithms to proactively surface abusive tweets to its teams for review. Previously, Twitter users had to flag offending tweets before the company would remove them. Now, about 38 per cent of abusive content that Twitter takes down is surfaced by the algorithms.

This isn’t the first time Twitter has used machine-learning technology, but previously it was applied to tracking spam.

Twitter is also now using a new appeals process to better prioritise tweets it should remove that contain private information about its users. The company now removes 2.5 times more tweets that share personal information since the launch of this feature.

For Twitter’s business, trying to reduce abuse and negative content can cut both ways. In previous quarters, declines in user accounts were attributed in part to efforts to purge more of the spam and accounts that violated Twitter’s rules.

Still, a platform with less abuse could retain more users and assuage marketers’ fears about advertising alongside offensive tweets.

“The acceleration in the daily active user number is the best leading indicator for the health of the platform,” R.W. Baird analyst Colin Sebastian said. “It’s a move in a positive direction.”

Twitter is now working to make its platform more conversational. The company is testing a new version of its app, called twttr, that threads message replies in a more intuitive design that makes it easier to follow discussions.

The company also plans to start experimenting with ways to give people more control over their conversations by giving users the option to hide replies to their tweets.

Twitter also made other tweaks to its platform in the quarter that helped drive more people to its app and bolster the effectiveness of ads, including refining its algorithm to show users more personalised tweets and adjusting the size of its video player.

“We intend to move much faster” to improve the user experience, Mr Dorsey said. Twitter is “heading in the right direction, but we still have some work to do,” he added.

The company expanded its headcount in the first quarter to about 4,100, from about 3,900 the previous quarter.

Looking forward, Twitter plans to spend more on promoting healthy discourse on the platform and expects operating expenses to rise by roughly 20 per cent in 2019.

Twitter projects revenue to also increase, to between $US770m and $US830m for the second quarter.

Dow Jones Newswires