Social Media

Twitter's ad revenue goes up amid news it's laying off sales staff

Twitter is trying a lot of different things: Analyst
Twitter is trying a lot of different things: Analyst

Twitter's ad revenue is increasing, but the company announced it will be restructuring its sales team in order to increase profits.

The social media company posted third-quarter earnings Thursday. Its advertising revenue was $545 million, a 6 percent boost from the $513 million it posted a year earlier. The majority of the growth was from international ad sales, which rose $242 million or about 21 percent, year over year.

"Twitter is unique, more of a messaging platform," said Aviel Ginzburg, co-founder and president of social media analytics company Simply Measured. "When we think of marketing, we don't just think of ads, we think of the organic [original] content that brands can create."

Despite the increases, Twitter said it will be laying off 9 percent of its global workforce, with a focus on the company's sales, partnerships and marketing divisions. It plans to move from three sales teams to two, Twitter's chief operating officer Adam Bain said on a call with investors on Tuesday.

"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 chief financial officer, said in a release.

"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."

Overall, Twitter said it had revenue of $616 million during the third quarter, an increase from $569 million or about 8 percent year over year. It also posted earnings per share of 13 cents.

The company beat the Thomson Reuters consensus revenue estimate of $606 million. It also topped earnings per share estimates of 9 cents. However, revenue increases were slower than the same quarter a year earlier, when it jumped 58 percent year over year.

The number of average monthly active users increased to 317 million over the quarter, up 3 percent from a year earlier. Daily active users also grew 7 percent year over year.

Simply Measured's Ginzburg said that other advertisers tend to lean toward competitors because Twitter's audience size is much smaller. However, his company sees that Twitter has better metrics when it comes to engagement, or getting people to respond to and interact with advertising.

However, some agencies have expressed concerns over Twitter's ad products, with one media buyer noting that Twitter's prices are four to five times higher than Facebook's and that its new video strategy was not in line with what users are used to using the platform for.

A Twitter spokesperson said the rates were above its rates and inaccurate. On an investor call on Tuesday, Twitter said that its video ads are now its fastest growing revenue growing product.

He also sees that Twitter is well-equipped for live streaming because its platform is where people go to see events unfold in real time. While other platforms focus on programmatic or automated data analytics to provide specifically targeted advertising for the user, Twitter is unique in that its conversations are reflections of what is actually happening. It's also partially why Twitter had a larger sales team to begin with, since programmatic ad targeting needs fewer sales staff.

In addition, Twitter created a platform for influencers like social media stars, athletes and celebrities to share what they think with their fans.

"What makes Twitter so special is it's such an opportunity to be really innovative and impactful," he said. "It's also a challenge for them because there are so many directions they can go in, so it's hard to focus."