3 Nov

Why Twitter’s Revenue Fell in 3Q17

WRITTEN BY Ruchi Gupta

TellApart wind-down weighs on revenue growth

The US-based (SPY) social media company Twitter (TWTR) reported its 3Q17 results on October 26, posting revenue and adjusted EPS (earnings per share) that both beat consensus estimates. But Twitter’s 3Q17 revenue shrank on a year-over-year basis, so what happened?

The winding-down of Twitter’s TellApart advertising product weighed on the company’s top line in the latest quarter and was largely responsible for the 3Q17 revenue decrease.

Why Twitter’s Revenue Fell in 3Q17

Twitter revenue fell 4.2%

Twitter reported revenue of $590 million in 3Q17, down 4.2% year-over-year. However, the top-line metric was still better than the consensus estimate of $587 million.

Alphabet (GOOGL), the parent of Google and a Twitter online advertising rival, posted revenue growth of 24% in 3Q17. Amazon (AMZN), an e-commerce company that also offers online advertising services to its merchant customers, posted revenue growth of 33.7% year-over-year in 3Q17.

Square (SQ), a payments company that shares a chief executive with Twitter, was scheduled to release its 3Q17 results on November 8.

Ad sales fell 8% as Twitter winds down TellApart

Twitter acquired TellApart in 2015 in an all-stock deal. TellApart, a marketing technology firm, was expected to bolster Twitter’s direct-response advertising, which are the type of ads that encourage people to take action, such as clicking on a link to a watch video. After keeping TellApart for a while, Twitter finally decided to wind down the business. Given that TellApart is a sizable business, its wind-down is causing negative impact on Twitter’s topline growth. But the company hopes to eventually get over this problem.

Twitter’s advertising business registered an 8.0% year-over-year decline in sales in 3Q17.

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