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Twitter says it's having trouble competing for advertising dollars

Sales in the third quarter won't come close to Wall Street's estimates as advertisers increasingly favor rival social networks.

Twitter's competition is eating its lunch.

The company didn't phrase it that way Tuesday when it forecast third-quarter sales of $590 million to $610 million, well below analysts' estimates of $678.2 million.

Twitter has failed to meet revenue estimates for the second quarter in a row.

Twitter's third-quarter revenue forecast was dramatically lower than analysts expected, sending shares down in after-hours trading. Revenue in the second quarter also missed expectations.

James Martin/CNET

Twitter put it this way, instead: "First, there is increased competition for social marketing budgets," the company wrote in its letter to shareholders to shareholders. And second, "We're still priced at a premium CPE [cost per engagement] relative to others."

In other words, rivals like Facebook and Snapchat are getting a bigger share of companies' advertising dollars, largely because Twitter is more expensive.

Shares fell more than 11 percent in after-hours trading on the news.

To attract advertisers, the company said it plans to put greater emphasis on mobile video. That ties into recent a deal to live-stream 10 NFL Thursday night games this season. In addition, Twitter will stream National Basketball Association stream pregame shows, broadcast some games from the Pac-12 conference and live-stream Major League Baseball and National Hockey League games. Twitter will also be the home of a nightly sports-highlights show called "The Rally."

The company on Tuesday also reported a 1 percent increase in the number of monthly active users in the second quarter, rising to 313 million from 310 million. Profit minus some costs, such as employee stock compensation, was 13 cents a share, beating the 10 cents a share estimate of analysts polled by Thomson Reuters. Second-quarter revenue was $602 million compared with analysts' estimates of $607 million.