Is Twitter Inc. tapped out? Investors will have a better idea later Tuesday when the social media firm reports its quarterly earnings. Once again, all eyes will be on the number of monthly active users, which is important because it directly equates to advertising revenue. Twitter reported growth flatlining at 320 million monthly active users from the third to the fourth quarter last year. If you exclude SMS Fast Followers, an audience that uses Twitter through text messaging in some foreign markets, user numbers actually declined over that period to 305 million from 307 million.
Twitter shares plummeted more than 16% the day after the San Francisco social media company posted a weak quarterly earnings report that cast widespread pessimism about its prospects. Shares of Twitter fell 2.89 to 14.86 at the end of trading Wednesday. On Monday, the company missed Wall Street revenue estimates for the first quarter of 2016. It also forecast second-quarter revenue between 590 million and 610 million -- well below Wall Street estimates of 677 million. "Investor confidence is unlikely to return any time soon," said Brian Wieser, an analyst for Pivotal Research Group, in a note to clients.
Yahoo Inc. remained tight-lipped Monday about its ongoing sale, but unexpectedly dished some dirt on itself, revealing to shareholders that it overpaid for the microblogging platform Tumblr. Nestled among its weak second-quarter financial results were impairment charges -- write-offs for intangible assets -- totaling 482 million, which were chalked up to "the fair value of the Tumblr reporting unit [being] less than its carrying amount." Yahoo paid 1.1 billion for Tumblr in 2013. The impairment charges wipe more than 40% from the platform's value. Yahoo's evaluation of the Tumblr platform was "long overdue," said Erik Gordon, a professor of the Ross School of Business at the University of Michigan, who said companies are meant to regularly reassess the value of their intangible assets.
Twitter may trim its staff again by about 300 people or 8 percent of its workforce, as the company tries to cut costs in trying times. The widespread job cuts could come before the company releases its third-quarter earnings on Thursday, according to Bloomberg, which cited people familiar with the matter. It cautioned that the precise number of jobs affected could change. A Twitter spokeswoman said in an email that the company doesn't comment on rumor or speculation. Twitter announced in October last year that it was laying off 336 employees.
The social networking giant is predicted to announce 1.1 billion in first-quarter profits, with earnings per share at 62 cents, when CEO Mark Zuckerberg reports earnings after the markets close on Wednesday. Facebook's continued success is fueled by mobile as well as video ads across Facebook and Instagram. Mobile accounted for 80 percent of Facebook's revenue last quarter, and that number is expected to rise, eMarketer estimated. E-commerce advertisers' spending on mobile versus desktop rose 15 percent over last quarter while return on ad spend rose 57 percent year-over-year, according to Nanigans, a Facebook marketing partner. It's no longer a question of whether to advertise on social networks.