UPDATED 18:15 EDT / JULY 26 2016


Twitter’s struggles continue after disappointing Q2

Microblogging platform Twitter Inc. continues to struggle to find its place in a world dominated by the likes of Facebook and Google, and its recent Q2 earnings report revealed that even a bump in user growth may not solve all of its problems.

According to Twitter, its user base grew by 3 percent year-over-year last quarter, swelling to over 313 million monthly active users. Despite that, however, the company noted an overall decrease in advertiser demand, which led to revenues of only $607 million last quarter, a few million shy of the $613 million expected by Wall Street. This news resulted in a 10 percent drop in Twitter’s stock price in after-hours trading.

“We’re seeing a continuation of the trends discussed last quarter with less overall advertiser demand than expected,” Twitter explained in its letter to shareholders.

Image courtesy of Twitter Inc

Image courtesy of Twitter Inc

According to the company, it believes there are two explanations for why growth in advertising revenue has slowed. First, Twitter says that there is more competition for social media ad budgets, meaning that the site must “continuously raise the quality bar on the advertising solutions we bring to market.” Second, Twitter says that its advertisements are “priced at a premium CPE relative to others.”

“To achieve re-acceleration in our ads business,” Twitter said in its letter, “we need to continue to win our share of social marketing budgets and continue to deliver advertising solutions that extend beyond social marketing — into performance and premium mobile video budgets. These are large incremental market opportunities with strong growth that we believe Twitter is well positioned to capture over time.”

Twitter explained that expanding its video content is an important part of its plan to win over advertisers, and the company says that it is uniquely positioned to offer premium live video content that can be laser-focused on an engaged and affluent audience. The company added that it plans on expanding its video platform in the near future, offering features like  accurate audience verification, reserved buying, and reach and frequency planning and purchasing.

People still don’t know what Twitter is

While 313 million monthly active users is certainly impressive, it pales in comparison to Facebook’s users base of over 1.51 billion people.

Twitter has plenty of brand recognition—in fact, the company’s own study recently found that 90 percent of people globally recognize the Twitter brand—but a surprising amount of people still do not know exactly what Twitter is or how to use it. According to that same study, even the people familiar with Twitter by name are not too clear on its purpose.

“But what about the people who know the brand but don’t use Twitter?” Twitter said in a blog post about the study. “We asked lots of questions and two key themes emerged. First, most didn’t know or simply misunderstood what Twitter was for – many thought of Twitter primarily as a social network, a place to find and connect with friends and family members. Second, they thought if they wanted to use Twitter, they were ‘supposed to Tweet every day’ and didn’t think they would have that much to say. We realized we had some explaining and clarifying to do!”

That is not exactly reassuring for a company that has been around now for over 10 years.

Photo credit: Esten Hurtle (@esten) for Twitter, Inc.

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