Twitter Inc posted worse-than-expected quarterly revenue and profit on Thursday, plagued by technical issues that hurt its advertising, and unusually low demand over the summer, sending its shares down about 20%.
Chief Financial Officer Ned Segal said the company’s ad platform encountered bugs, or glitches, that hindered its ability to target ads and share data with partners.
“These issues were in our control and we will work to do better,” said Segal on a call with analysts.
Twitter’s revenue rose 9% from a year earlier, but fell short of Wall Street expectations as total advertising revenue missed estimates.
Twitter’s efforts to clean up abusive content and make the platform more user-friendly appear to have driven up use, addressing longstanding concerns about growth of customers, and Twitter has also rolled out new video ad products that attract brands.
The ad problems were, however, a major, unexpected issue and come as the holiday buying season, the most important for ads, gets underway. Twitter cut its fourth-quarter revenue forecast to below Wall Street estimates.
Twitter said that it was working on a total fix for the ad 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 stabilize, 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 ad 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 $940 million and $1.01 billion. Wall Street on average expects $1.06 billion.
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 monetizable 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, beating analyst expectations of 141 million, according to IBES data from Refinitiv. This alternative metric was up 17% year-over-year.
In July, Twitter launched a more personalized 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.
Third-quarter net income was $37 million, or $0.05 per share. In the same period last year, the firm reported net income of $789 million, or $106 million when adjusted to exclude certain items.
Analysts had expected net income of $161.5 million.
Total operating expenses, including cost of revenue, rose by 17% year-over-year to $780 million, partly due to plans to hire more employees.
Twitter shares closed down 20.8%.