Technical glitches and weak summer demand dragged down the company’s quarterly revenue and profit, disappointing Wall Street and sending its shares falling by more than 20 percent.
The technical issues affected its advertising platform, hindering users from being able to target ads and share data with partners, Twitter’s Chief Financial Officer Ned Segal said on Thursday.
“These issues were in our control and we will work to do better,” said Segal on a call with analysts after the financial results were announced.
Twitter’s revenue rose 9 percent from a year earlier, but fell short of analysts’ expectations as total advertising revenue missed estimates.
The company’s efforts to clean up abusive content and make the platform more user-friendly appear to have driven up use, addressing long-standing concerns about customer growth, and Twitter has also rolled out new video advertisement products that attract brands.
The advertisement problems were, however, a major, unexpected issue and come as the holiday buying season, the most important for advertisements, gets under way. Twitter lowered its fourth-quarter revenue forecast to below Wall Street estimates.
Twitter said that it was working on a total fix for the advertisement problems but that it was not yet in place. Analysts tracking Twitter said the company’s financials would take at least a few more quarters to stabilise, with a quick turnaround looking increasingly unlikely.
“Not expecting a quick rebound in Twitter’s financials for at least a few quarters, as shortfall likely will carry into 2020,” said analyst Craig Huber of Huber Research Partners.
On the conference call with analysts, Segal said Twitter had turned off some advertisement settings, which limited how the company could target ads to people or show advertisers how effective their ads were. It acted after finding two bugs that inadvertently shared certain data even if users opted out of sharing it.
“So we stopped doing that and although we’re working on remediation, there isn’t remediation yet in place and so the effects of that will continue into Q4,” said Segal.
Twitter expects revenue in the fourth quarter, which will include Black Friday and the December holidays, to be between $940m and $1bn, lower than an average of $1.06bn expected by Wall Street.
However, the social media platform did manage to record a rise in daily users who see ads on the site, beating analyst estimates.
Twitter has stopped disclosing its monthly active users figures, instead reporting monetisable daily active usage (mDAU), a metric it created to measure users exposed on a daily basis to advertising through the site or Twitter applications that are able to show ads.
Chief Executive Jack Dorsey said growth in mDAU was driven by product improvements, including making the site easier to navigate and more proactively identifying abusive content to remove.
The company’s average mDAU hit 145 million, up 17 percent year-over-year and beating analyst expectations of 141 million, according to IBES data from Refinitiv.
In July, Twitter launched a more personalised desktop Twitter.com as part of a plan to make the platform better for conversations. It has also experimented with the ability to follow topics and has recently expanded testing for a feature to hide replies.
Recently, the company made a six-second video bidding available for global advertisers and it has continued to expand its live and on-demand video partnerships, including deals with NBC Olympics and Eurosport for coverage of the 2020 Tokyo Games.
Twitter’s third-quarter net income was $37m, or $0.05 per share. In the same period last year, the firm reported net income of $789m, or $106m when adjusted to exclude certain items.
Analysts had expected net income of $161.5m.
Total operating expenses, including the cost of revenue, rose by 17 percent year-over-year to $780m, partly due to plans to hire more employees.
Twitter shares closed down 20.8 percent.