Twitter announces cost-cutting measures along with earnings

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Image: LEON NEAL/AFP/GETTY IMAGES

Twitter is set on turning a profit next year.

As part its strategy to reach profitability in 2017, Twitter announced it will layoff 9 percent of its workforce, or about 350 employees, as part of its third-quarter earnings report Thursday.

Twitter flew higher than expected for its quarterly earnings, beating expectations on user growth and revenue. But the struggling microblogging site, which has yet to ever turn a profit, is introducing a plan to cut costs and further focus the business.

We see a significant opportunity to increase growth as we continue to improve the core service. We have a clear plan, and were making the necessary changes to ensure Twitter is positioned for long-term growth,” Twitter CEO Jack Dorsey said in a statement.

Wall Street, Twitter’s worst enemy since the company went public and failed to meet growth expectations, seemed pleased. The stock was up by nearly 5 percent in pre-marketing trading, which is a rare sight for post-Twitter earnings.

“It’s refreshing to hear management with clarity and confidence,” Carter Mansbach, president of Juniper Wealth Strategies, told Mashable.

The report comes after a wild past three months for Twitter. The company attracted acquisition interest from several large companies: Salesforce, Disney and Google’s parent Alphabet. But those suitors quickly retreated.

Addressing the acquisition reports in his opening statement, Dorsey said, “Our board is committed to maximizing long-term shareholders value.”

Restructuring to efficiency

First, Twitter is taking immediate cost-cutting measures. The reduction in workforce, as previously reported, will fall on Twitter’s sales, partnerships and marketing divisions. Twitter is reorganizing its sales team from three to two divisions, the company said.

The decision follows in a round of layoffs the company made one year prior of 336 employees.

This past quarter, Twitter increased its user base to 317 million monthly active users, up from 313 million in the quarter prior and beating analysts’ expectations of 315 million.

Dorsey cited two improvements in the product with driving the growth: notifications and the home timeline. The addition of algorithm changes called “While You Were Away” and “In Case You Missed It” to Twitter’s timeline broke from the tradition showing all tweets in chronological order and ignited a trend of #RIPTwitter.

But instead, Twitter appears to be more alive than ever. “Weve been making hundreds of small changes as quickly as we can. Were seeing more people wanting to use Twitter and use it more often,” Dorsey said.

More video dollars

Twitter live video strategy is also attracting more users. Its streams of the National Football League’s Thursday night games had a growing audience week by week. Twitter’s least active users also exceeded heavy users in average time spent watching the game.

The company posted revenue of $616 million, up 8 percent year over year and again ahead of analysts’ expectations of $606 million in revenue, according to an estimate from Thomson Reuters. But unfortunately for Twitter, it translated to its smallest gain in revenue since going public in 2013.

To grow its revenue, Twitter is looking to cash in on more video ad dollars, competing with YouTube and other online video services. “The NFL deal and the rest of the deals were trying to drive toward profitability. Theres a lot of creative things that are team can do,” Chief Financial Officer Anthony Noto told investors.

 

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