Twitter gets more users but can’t seem to sell them ads: Gadfly

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New Delhi | Published: February 9, 2017 9:42:14 PM

At this point last year, Twitter was a company that had a hard time attracting new people to surf and tweet, but it was quite skilled at generating ad dollars from its die-hard users.

On the plus side, Twitter is finally showing some traction in attracting new users and keeping them longer. (Reuters)On the plus side, Twitter is finally showing some traction in attracting new users and keeping them longer. (Reuters)

At this point last year, Twitter was a company that had a hard time attracting new people to surf and tweet, but it was quite skilled at generating ad dollars from its die-hard users. Now Twitter’s problem has reversed. It’s still a mess of a company, but in a fresh way. People are using Twitter more, but advertisers are jumping ship. In theory, more Twitter users will lure back the advertisers that pay the company’s bills, but it’s hard to keep the faith in Twitter, which is innovative in being disappointing.

On the plus side, Twitter is finally showing some traction in attracting new users and keeping them longer. The number of people who use Twitter monthly rose nearly 5 percent in the fourth quarter from a year ago. For Twitter, that’s amazing. Twitter also said its daily users rose 11 percent from a year earlier, although Twitter doesn’t disclose specific numbers of daily users like its peers Facebook Inc. and Snap Inc. do. People also spent more time hanging out on Twitter, the company said.

Twitter surely benefited from a Trump bump, now that Twitter is the must-watch billboard of choice for the president. But it does seem Twitter’s efforts to better notify smartphone users of interesting activity on Twitter, and to show more videos of live sports or news events, have also contributed to the increase in Twitter users. User growth was a priority of CEO Jack Dorsey, and it’s paying off.

Twitter’s Q4 Sales Growth


Revenue is a different story. Sales grew 0.9 percent in the fourth quarter from a year earlier. That was by far Twitter’s worst growth in its history. Advertising revenue — which is about 90 percent of Twitter’s total — fell for the first time ever. To be fair, Twitter fired 9 percent of its staff in recent months and reorganized its advertising sales team. That kind of disruption isn’t good for business.

But Twitter executives found 20 different ways to say the revenue hiccups in the fourth quarter won’t improve soon. In a letter to stockholders, Dorsey said advertising revenue growth would “continue to lag that of audience growth in 2017.” Even more worrying, he said some of Twitter’s types of advertising are performing poorly and might get the ax. Dorsey said the company has seen “increased competitive pressure” that has hurt one of the most common types of advertising formats on Twitter.

It’s clear 2017 won’t be a healthy growth year for Twitter. Dorsey told analysts Thursday that it would have to prove Twitter’s value to advertisers all over again. Twitter’s chief operating officer, Anthony Noto, didn’t answer an analyst question on a conference call about whether the company’s revenue would increase this year.

That’s not great for the company’s stockholders, who are already holding a pricey investment. Before Thursday, Twitter was valued at 13.5 times its expected earnings before interest, taxes, depreciation and amortization for 2017, while Facebook is at 15.5, according to Bloomberg data. But Twitter’s Ebitda is semi-fictional because of the company’s dependence on paying people with stock. Including stock compensation, Twitter’s valuation jumps to 70 times RBC’s estimate for 2017 Ebitda. (Twitter did say Thursday that it planned to slash stock compensation expenses by 15 to 20 percent this year.)

There is light at the end of the tunnel. Maybe. If — and that’s a big “if” — Twitter can hold onto its new users, then advertising may follow. That seems to be Twitter’s strategy. “We believe that accelerating growth in audience and engagement will help re-accelerate growth in our ads business over time,” Twitter said in its letter to investors in October.

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It is a leap of faith, however. The company and its investors have to hope a year devoted to attracting new users for Twitter, and to narrowing the company’s striking losses, can lead into a 2018 of better revenue growth. That is an awful lot of wishful thinking for a company that hasn’t yet proved worthy of hope.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Google, Ikea’s Nordic Wind Crush Comes Too Soon for Sweden (2)
published Feb 9th 2017, 9:16 pm, by Jesper Starn(Bloomberg) —

The quest to supply everything from data server halls, insurance companies to large furniture stores with green electricity has flooded the Nordic region with wind power and crashed a $100 million renewable-certificates market.

While that’s good for the environment and the image of companies from Google Inc. to Ikea Group, the growth in renewable energy has been faster than Sweden and Norway expected. That’s pushed certificate prices down 45 percent this year, undermining the incentive to invest in new wind power projects.

It’s a case of too much, too soon for the Swedish Energy Agency, the market regulator, which never really planned for expansion at this rate. Taking into account a typical wind turbine’s life of about 20 years, its preference was always for a major build-out by the end of next decade, just before state-owned utility Vattenfall AB starts to close six 1980s-era nuclear reactors.

With renewable capacity needed to meet a 2020 target either already in place or under construction, every additional investment will just add to a surplus, according to Nena AS, an industry consultant in Oslo.

“It’s like watching a python dying from starvation after devouring a pig that is too large for it to digest,” said Fredrik Bodecker, chairman of Bodecker Partners AB, an energy markets adviser in Malmo, Sweden.
Power Glut

Sweden and Norway plan to add 28.4 terawatt-hours of renewable generation by 2020, or enough to meet 10 percent of their joint annual power demand. In the renewable-certificates market, green energy producers receive securities that suppliers must buy to match customer demand. The surge in capacity hasn’t been met by increases in consumption, hence the surplus and plunging prices.

Google, which operates a data server hall in Finland, has signed at least six deals in the past two years to buy power at a fixed price directly from wind parks in Sweden and Norway. The company didn’t respond to a request for comment.

“There is just such an insane amount of wind power projects that should not really be built,” said Joachim Jernas, a senior analyst at Nena. “During 2016, decisions to build 7.1 terawatt-hours of wind power in Norway and Sweden were made.”
Green Ikea

After spending an undisclosed sum on 46 wind-power plants in Sweden between 2011 and 2015, Ikea now generates enough to supply its 20 department stores with green electricity. There are no plans for further expansion in the Nordic region, according to Jonas Carlehed, a sustainability manager at the retailer.

While Norway has decided to phase out its involvement in the certificate system by 2020, Sweden is extending its participation for 10 years and will add another 18 terawatt-hours of renewable generation by 2030. The additional capacity will further expand a regional glut as investors have pledged to build at least three new wind farms in Norway and the first phase of Europe’s largest wind farm in northern Sweden was approved for loans from the European Investment Bank on February 6.

To slow down wind power development after 2020, the Swedish Energy Agency proposes to keep subsidy levels low until the end of the next decade by adjusting demand in the system, said Roger Ostberg, an analyst at the regulator. Such a plan could discourage investors seeking stable, long-term returns, according to Paul Stormoen, the managing director of OX2’s wind power development.

”It is not just something you can switch off and on, there is a long process behind every investment” Stormoen said.

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