Sluggish growth for Twitter; reports Q4 2016 net loss of $167 million

Twitter recently reported a net loss in the fourth quarter of 2016 of $167 million, after a $90 million deficit in the corresponding period a year ago. The company's shares dropped more than 12 percent to close at $16.41 as investor hopes faded for a revival of the micro-blogging platform, which has been lagging behind its social media rivals.

Revenue in Q4 2016 rose one percent for Twitter to $717 million. The crucial area of user growth saw Twitter end 2016 with 319 million monthly active users – an increase of four percent from the previous year and just two million more than the previous quarter. Despite the fact that US President Donald Trump shares updates via the platform, Twitter's user growth is relatively low.

Twitter relies heavily on advertising for its revenue, which was down slightly from the previous year at $638 million. In the United States alone Twitter's revenue was down five percent at $440 million. For the total year 2016, the company lost $456 million on revenues of $2.5 billion. That represented a narrowing of the deficit from 2015 and a 14 percent increase in revenue.

Twitter chief executive Jack Dorsey remains positive that the company will bounce back, speaking of long-term prospects following its efforts to revamp the platform with more video and other changes.

"The whole world is watching Twitter," said Dorsey in a conference call. "While we may not be meeting everyone's growth expectations, there's one thing that continues to grow and outpace our peers: Twitter's influence and impact." Dorsey said Twitter "carries some of the most important commentary and conversations," and is a tool to mobilize people into action.

However, some analysts believe Twitter is growing at too smaller rate in the rapidly evolving social media space. For instance, Jan Dawson from Jackdaw Research says Twitter has been attempting to get more users and has improved engagement, but "some of this stuff has been in the works for over two years, and Twitter still doesn't seem to be making meaningful progress."

Dawson went so far as to label Twitter's revenue outlook as "pretty awful" in a blog post, and said the company will likely face a difficult time keeping advertisers interested.

Dawson said, "Twitter's big competitors for direct response advertising  -- notably Facebook and Google  --  are just way better at this stuff than they are, and Twitter simply hasn't made anywhere near enough progress here over the last few years. As a result, Twitter is enormously susceptible to competitive threats."

Despite the criticism, Twitter says it continues to work toward achieving profitability in 2017. Dorsey said that Twitter "overcame the toughest challenge for any consumer service at scale by reversing declining audience trends and re-accelerating usage." He added that "daily active usage accelerated for the third consecutive quarter, and we see this strong growth continuing."