On Oct. 24, Twitter shares dropped over 19%. Twitter blamed advertising bugs for a big revenue miss in the third quarter. The forecast was $874 million in revenue, but only $824 million was earned.
This prompted questions from investors about the company’s ability to execute and drive business improvements over the long term, according to MarketWatch.
As of the market close of Oct. 28, Twitter’s stock price was roughly $30.
“We view Twitter’s issues during Q3/Q4 as largely internal, self-inflicted and fixable over the near term,” wrote MKM Partners analyst Rohit Kulkarni.
“However, amplified impact on revenues due to a one-time technical bug makes us wonder whether one can confidently have a view on Twitter’s long-term potential.”Twitter’s turnaround has clearly hit a small detour, in our opinion.”
Kulkarni had a neutral rating and $44 target on the stock, according to a CNBC article.
Despite this setback, Twitter user growth is on the rise and the platform is still attracting users. Twitter added six million users since the previous quarter and 21 million users compared to the same period this time a year ago.
One of the bugs in question was regarding data collection. A new user to Twitter was asked whether the platform could use device-specific settings to personalize the user’s timeline.
The platform collected that data, even when the user responded “no” to the prompt.
The company realized the improper use of user data and shut off the feature entirely, limiting its ability to target and sell ads. This is not profitable, however, yet it is very commendable on their part.
Companies should strive to be sustainable and earn profits while being socially responsible to all stakeholders they are connected with.
The CFO Ned Segal spoke at the earnings call about the fragility and the large variability of ad revenue.
“Although we are working on remediation, there isn’t remediation yet in place and so the effects of that will continue into Q4.”
The company warned shareholders that the headwinds, which were felt for only part of the third quarter, will be felt for the entirety of the fourth quarter and will “continue to weigh on the overall performance of our advertising business in the near term.”
Depending on how an investor looks at this and their sentiment, this can be a buying or shorting opportunity.
Currently, Twitter is in a growth phase. Aside from user growth, Twitter’s quarterly expenses grew 17% during the period, to $780 million, in part due to hiring and investment in sales, marketing and research and development.
The company ended the quarter with 4,600 employees, 300 more than at the end of the second quarter.
The spending does not stop here. The company expects to keep spending for fiscal 2019.
Twitter is predicting capital expenditures to come in at $550 to $600 million. That’s a major increase of liabilities from $487 million just a year earlier.
With all the noise, setbacks and disappointment, it’s still possible for Twitter to rally back.
Many can learn from the microblogging social network, even about Peter Drucker.
Drucker, a management consultant, strived to make business leaders see the community as the responsibility of the corporation.
He called on leaders to embody “the Spirit of Performance” by having high levels of integrity in their moral and ethical conduct, focusing on results, building on their strengths and leading beyond borders to meet the requirements of stakeholders.
This mentality ultimately serves the common good for investors and users alike.
