Restructuring effort also includes slashing workforce by 9% worldwide
Online social networking and micro-blogging site Twitter Inc. (NYSE: TWTR), while announcing its Q3 FY16 financial results on October 27th, 2016, said that it would shut down its the video-sharing mobile app Vine in the coming months, even as it moves to cut 9% of its workforce worldwide to reduce costs. The decision comes after a failed attempt to sell Twitter as it fights against stagnating user growth, slowing revenue, and intense competition from rival social media platforms. The restructuring efforts, including the current layoffs and shutting down Vine could save Twitter $50 million to $100 million per year going forward.
In a post published jointly by Twitter and Vine to the blog platform Medium, the social media services said that the Vine website would stay live even after the mobile app is discontinued, giving users the chance to download and save any videos.
Vine is a short-form video sharing service where users can share six-second-long looping video clips. The service was founded in June 2012 by Colin Kroll, Rus Yusupov, and Dominik Hofmann in New York, and was acquired by Twitter in October 2012 for $30 million, just before its official launch. Twitter introduced Vine in January 2013 as a way for users to share small snippets of video that were six seconds or less. Vine was important for Twitter because it helped to define a new type of video sharing. Vine’s six second clips go hand-in-hand with Twitter’s 140 characters and the acquisition defined the parameters for social video sharing.
Soon after its launch, Vine’s growth soared, leaving behind competitors such as Instagram and Mobli, partly because Vine had become synonymous with mobile video sharing. Vine videos also included trending hashtags, which make exploring content on the platform easier, and boasted verified badges for high-profile users. By December 2015, Vine had 200 million active users. More importantly, Vine’s six-second looping videos proved popular for sports and comedy and there were a few break-out internet stars on the format, such as singer-songwriter Shawn Mendes and make-up artist Jesse Smiles. Social media users reeled over the news and Vine quickly became the top-trending topic on Twitter in the U.S. with over 1.64 million tweets.
The app, which had 100 million people watching videos every month and 1.5 billion daily video loops, launched video on Twitter. Sporting occasions, where goals, celebrations and highlights were shared in short looping clips through Vine, brought the app to a mainstream audience. However, user numbers have dwindled by million in recent years, while Twitter has integrated video sharing directly into its main mobile apps and experience, while also trying its hand at live video with Periscope.
In June 2016, Vine sought users to beta test a longer video feature, but Twitter sounded the death knell for Vine when it took a stance to not support separate apps, only its core mobile apps and social network. Twitter also recently made Periscope videos viewable directly within the main Twitter app.
Efforts to emerge as a leaner and focused entity
Twitter has been facing angry investors for its inability to add users at a rapid pace compared to other social media sites like Facebook, Instagram, and Snapchat. Moreover, Twitter’s MAUs has stagnated for the past year, compared to its rivals. It comes as no surprise that Twitter’s board is considering finding a suitable buyer that would kickstart the Company’s growth engines. Twitter is also considering selling units like MoPub or Fabric that do not directly impact its bottom-line or stock price, to emerge a more leaner and focused company.
CEO Jack Dorsey said in a company release that the move to shut down Vine is part of the necessary changes to position the Company for long-term growth, given that Twitter has been the subject of numerous takeover and acquisition rumors over the last few months.
Twitter refines core services
In recent months, Twitter has focused on refining its core services in four key areas: onboarding, the home timeline, notifications, and Tweeting. During Q3 FY16, the enhanced timeline drove increases in retention for both monthly active and daily active usage, as well as increases in Tweet impressions and engagement.
Twitter is also increasing its use of machine learning techniques to improve the relevance of notifications and provide additional content to people who come back to Twitter so they can continue to explore all of the unique news and commentary their service has to offer. For the past few months, Twitter has been working hard to build the most important safety features and updating their safety policies to give people more control over their Twitter experience.
With regard to content, Twitter is improving its premium live-streaming video experience and Periscope. The Company has signed more than a dozen live streaming video partnerships since June 2016, many of which have already started streaming content on a daily or weekly basis. Twitter has been entering into several partnerships for sports, politics and entertainment content such as the National Football League’s Thursday night games, which it can stream alongside tweets related to the video. The first five NFL Thursday Night Football games reached more than 3 million viewers, up more than 28% from Twitter’s inaugural game with 2.35 million viewers.
Twitter’s live streams of the U.S. presidential debates were also very successful. The second and third debates averaged a reach of 3.3 million unique viewers, an increase of more than 30% over the first presidential debate. In total, the debates generated an average of almost 3 billion Tweet impressions, with the second debate generating a record of 16 million debate-related Tweets sent, making it the most Tweeted debate ever. Twitter has integrated its video player with several partners including Sports Illustrated on the web and Apple TV, Amazon’s Fire, and Microsoft’s XBox on connected TVs.
Q3 FY16 financial highlights
While Twitter has posted better-than-expected results in Q3 FY16, it is focusing on restructuring its sales, partnerships, and marketing efforts to achieve GAAP profitability in 2017. During the reporting quarter, total revenue grew 8% Y-o-Y to $616 million, driven by product improvements and organic growth with marketing initiatives.
During Q3 FY16, Twitter’s advertising revenue grew 6% Y-o-Y to $545 million, with mobile advertising revenue accounting for 90% of total advertising revenue. Data licensing and other revenue jumped 26% Y-o-Y to $71 million. For the reporting quarter, Twitter’s average monthly active users (MAUs) grew 3% Y-o-Y to 317 million compared to 313 million in the previous quarter. Average daily active users (DAU) grew 7% Y-o-Y versus a 5% growth in Q2 FY16 and 3% in Q1 FY16.
In all, Twitter narrowed its GAAP net loss to $103 million, or $0.15 per diluted share, in Q3 FY16, from $131.7 million, or $0.20 per diluted share, a year earlier. Non-GAAP net income stood at $92 million, or $0.13 per diluted share.
Betting on live video to spur growth
Twitter, which has been the subject of numerous takeover and acquisition speculations over the last few months, is now confronted with the need to rely more heavily on its live video streaming strategy, after top potential bidders were said to have lost interest in making buyout offers amid pressure from their investors. Twitter believes that its recent push into news and sports on mobile devices could spark an interest among potential acquirers. After signing more than a dozen live streaming video partnerships since June 2016, Twitter believes it is better engaging with its users. Moreover, the new strategy is seen to better entice users without Twitter accounts to start using the service, thereby enabling Twitter to share revenue on the video ads.
Twitter’s stock finished the day at $17.66, gaining 1.49%, at the close on Friday, October 28th, 2016, having vacillated between an intraday high of $18.00 and a low of $17.50 during the session. The stock’s trading volume was at 29,254,092 for the day. The Company’s market cap was at $12.48 billion as of Friday’s close.