Twitter reported its first profit yesterday, sending its shares to their highest levels in two years and suggesting advertisers are beginning to spread their online spending beyond Facebook and Google.
Its $91m in net income in the fourth quarter comes after a similar upbeat pre-Christmas performance by Snapchat’s parent, which posted strong revenue growth on Wednesday following unexpected increases in users and advertising.
For years, Wall Street has been sceptical that smaller internet companies such as Twitter and Snap could ever challenge the dominance of Google and Facebook, which together account for more than three quarters of global spending on digital advertising.
This week’s turnrounds at Twitter and Snap follow signs of strain in their larger rivals’ dominance. Alphabet’s shares weakened last week after it spooked Wall Street with a big jump in the cost of distributing Google’s advertising and services on mobile platforms. Facebook also came under pressure as it reported its first drop in North American usage and a decline in time spent on its apps at the end of last year.
Yet the two companies’ financial might, with a combined market valuation of more than $1tn, still dwarfs their smaller rivals.
Investors have waited 12 years for Twitter to report a profit and yesterday’s announcement sent its shares up as much as 29 per cent before they pared gains in a wider Wall Street sell-off in the afternoon. Snap had risen 48 per cent on Wednesday but was a victim of profit-taking and yesterday’s market rout, losing 7 per cent in late trade.
Twitter’s $91m in net income was an improvement on losses of $167m a year earlier. Even though it beat Wall Street’s sales forecasts for the first time since going public almost a year ago, Snap remains heavily loss making.