Earlier this week Twitter (NYSE: TWTR) announced its first quarter performance, which surpassed market expectations. But the market is still not pleased. This was the first ever quarter that showed declining revenues since the company went public. And, the future doesn’t look much rosier.

Twitter’s Financials

For the quarter, Twitter’s revenues fell 8% over the year to $548 million. The company reported an adjusted EPS of $0.11. The market had forecast revenues of $513 million and an EPS of $0.01 for the quarter.

By segment, advertising revenues fell 11% to $474 million. Data licensing and other revenue increased 17% to $74 million.

By region, revenues from the US fell 13% to $341 million and international revenues grew 2% to $208 million.

Among operating metrics, daily active user (DAU) count improved 14% over the year and monthly active usage (MAU) rose by 9 million to 328 million. The market was looking for a net growth of 4 million users to 321 million. Average US MAUs grew 7% and average international MAUs grew 6%. Within advertising, total ad engagements increased 139% over the year and cost per engagement (CPE) fell 63% over the year.

The increase in the users is partly attributed to the increasing adoption of its live premium video content. The service had 45 million unique viewers, up 31% sequentially. Additionally, Twitter is also benefiting from the tweets from President Donald Trump’s Twitter account and has seen significant increases in traffic and/or subscribers to the news and political accounts since the election.

For the current quarter, Twitter forecast an adjusted EBITDA of $95-$115 million.

Twitter’s Advertising Worries

Twitter may have delivered impressive results and surpassed market expectations on the user statistics as well. But all that does not really spell a rosy future for the company. Unlike other bigger players like Facebook and Alphabet, which have figured out the code to crack the mobile advertising market, Twitter has still not figured out how to translate the increasing user metrics to higher advertising revenues.

According to a report published by eMarketer earlier this year, the US digital ad spending is estimated to grow 16% to $83 billion this year. Alphabet will continue to dominate the search ad market with 78% market share, or $28.55 billion revenues. Facebook is expected to be the leader in the display advertising segment with 39% market share and $16.33 billion in revenues. Alphabet will account for 12.5% of display ad revenues with $5.24 billion share, leaving others like Twitter far behind. Twitter’s recent announcement of 11% decline in advertising revenues is a clear indicator of how Facebook and Alphabet are eating away at its share.

Twitter believes it is fixing the issue by improving focus on videos. Within live-stream videos, Twitter offers more than 800 hours of live video across 450 events. Of those hours, 51% were sports events, 35% were news and politics, and 14% were entertainment related. The improved content is driving sales of video ad sales, which have resulted in 12% increase in ad engagement rates. But the growth is clearly not enough to rival Facebook and Alphabet’s performance. Within the live-streaming segment, Twitter recently received a big setback when Amazon announced that it had won the rights to live-stream the NFL games. Last year, the games were streamed live on Twitter, but this year, Amazon appears to have outbid it.

In other video content, things aren’t much better. Twitter has been selling stand-alone video ads that show up between organic posts and has allowed marketers to buy pre-roll ads that play ahead of the videos produced by leading content creators. More recently, it began testing mid-roll video ads. Mid-roll video ads may not necessarily work for Twitter considering that most of the video clips on its platform are uploaded by users and are less than a minute long. Inserting an ad into these clips may not deliver the needed results. Twitter also needs to improve the analytics on its video ads. Most marketers on Twitter have complained about the level of analytics that are delivered from Twitter. Analysts believe that if Twitter does not improve that soon enough, the advertising dollars coming its way will continue to decline.

Twitter’s stock is trading at $16.61 with a market capitalization of $13.1 billion. It touched a 52-week high of $25.25 in October last year and had fallen to a 52-week low of $13.73 in May last year. Twitter’s stock had listed in 2013 at $26 apiece. For 2017 so far, the stock hasn’t even crossed the $20 mark.