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Twitter Reports Larger-than-expected Fourth-quarter Net Loss

Twitter has reported loss in the fourth quarter of the financial year, making it the 10th consecutive quarter of lower revenue.

On Thursday, Dorsey told analysts during a conference call that the Twitter’s year-over-year revenue growth slowed to less than 1%. The company’s revenue grew to $717.2 million in the fourth quarter, marking the slowest growth for the company since it went public in 2013.

“It may have felt like we weren’t changing much this past year, but…hundreds of little changes added up to more predictable and sustained growth we will now use as a foundation to be more inventive and take bigger risks,” he said.

“It will take time to show the results we all want to see,” Dorsey said, “and we’re moving forward aggressively. It’s been hard, it will continue to be hard, and it’s all worth it.”

Twitter told investors it is trying to turn losses into profits in 2017, but that will be challenging due to slow growth in advertising revenue. The social media revealed that its users are more frequently using the service, but that is not turning into more revenue.

Twitter is currently competing with Facebook and Snapchat for ad dollars. Facebook has more than 1.86 billion monthly users, while Snapchat has around 301 million monthly users. Snap reportedly has a market value between $20 billion. In comparison, Twitter is valued at $12 billion.

Twitter’s shares fell 18 percent and were down 12.4 percent when the market closed Thursday.

“The Trump effect was zero,” analyst Michael Pachter told Reuters after Twitter issued a disappointing quarterly report.

In its letter to investors, the company warns that revenue could “be further impacted by escalating competition for digital ad spending.”

“Twitter made significant strides in 2016 as we positioned the company for long-term sustainable growth and GAAP profitability,” the company told its shareholders.

“In the fourth quarter, we made major strides in the Home timeline, launching a number of features designed to show people the most important Tweets first — news and commentary they would have wanted to see but may have missed. We also improved the relevance of notifications to increase engagement and bring people back to Twitter. These changes improved retention for both monthly active and daily active usage, as well as increased Tweet impressions and time spent on the service.”

“Total revenue for 2016 reached $2.5 billion, up 14% year-over-year. Adjusted EBITDA for the full year improved by nearly $200 million, reaching $751 million with a 30% margin and exceeding our guidance range of $700 to $715 million and our initial guidance range of 25-27%. We also generated significantly more adjusted free cash flow, with more than $440 million generated in 2016 compared to less than $5 million in 2015. We ended the year with $3.8 billion in cash, cash equivalents, and marketable securities.”

“Finally, we continued to make meaningful progress in reducing our annual stock-based compensation (SBC) expense on both an absolute basis and as a percentage of revenue. SBC expense for the year (on an absolute basis) decreased 10% year-over-year and declined over 600 basis points year-over-year as a percent of revenue, reaching 24% in 2016 down from 31% in 2015 and 45% in 2014. We remain committed to reducing stock-based compensation to high single digits as a percentage of revenue over time, bringing us more in line with our peers.”

“In the fourth quarter, total revenue reached $717 million, up 1% year-over-year. Total advertising revenue was $638 million, down slightly year-over-year. Twitter-owned-and-operated advertising revenue was $553 million, down 1% year-over-year. Strength in video was offset by year-over-year declines in revenue generated from traditional Promoted Tweet and direct response ad formats. Non-owned-and-operated advertising revenue reached $85 million, or 13% of advertising revenue, roughly flat year-over-year. Significant gains in revenue from the Twitter Audience Platform were offset by significant year-over-year declines in revenue from TellApart. We expect contributions from non-owned-and-operated advertising revenue to face significant headwinds in 2017 from factors impacting TellApart.