Twitter’s Revenue Grows Despite User Stagnation

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February 6, 2015 by Bill Johnson


Twitter just can’t seem to catch a break.

Critics have panned the company’s slowing user growth. It has churned through the hiring and firing of top managers. Recently, investors have started to wonder if Dick Costolo, Twitter’s chief executive, is the right man for the job.

Now it looks as if 2015 is off to a rocky start.

On Thursday, the company reported its fourth-quarter earnings, saying it had 288 million regular users on its platform at the end of 2014, an addition of only four million people from the previous quarter and roughly one-fifth the number who visit Facebook on a monthly basis. This is a significant miss from analysts’ expectations of about 291 million regular users, and far less growth than the company has had in previous quarters.

That lag in new users is just a pit stop for Twitter, Mr. Costolo said in a news release; he expects user growth numbers to bounce back by the end of the first quarter, according to early internal results.

The earnings report held some good news for the eight-year-old micromessaging service, which since its initial public offering in 2013 has been playing defense against shareholders who expect blockbuster results akin to Facebook, a far larger social media service. Twitter said it had revenue of $479 million in the fourth quarter, up 97 percent compared with $243 million a year ago, and easily surpassing analyst expectations of $453 million.

The company reported a loss of $125 million, or 20 cents a share, up from a loss of $500 million, or $1.41 a share, in the fourth quarter a year ago. But using a measure of income that excludes stock-based compensation and other expenses, the company reported a profit of $79 million, or 12 cents a share, in the quarter, compared with a profit of $10 million a year ago.

Analysts lowered their estimates for Twitter’s year-end quarter after Anthony Noto, Twitter’s recently appointed chief financial officer, cautioned that continued changes to Twitter’s core product might cause the company’s metrics to fluctuate.

The real proof of change, some say, will be in the coming months.

“Twitter is very much in its ‘prove it’ time period, and the results this quarter won’t prove it,” said Robert Peck, an analyst at the brokerage firm SunTrust Robinson Humphrey. “What we want to see: As we look into the first quarter, is Twitter going to see real traction from it for the rest of the year?”

For months, Twitter has been trying to prove that traction will come in a series of small yet significant changes over time, and that its best years are still ahead.

It has promoted Kevin Weil, a well-regarded manager in Twitter’s revenue division, to oversee the company’s consumer and revenue products. The company has also released a new feature that allows users to take video via the Twitter app, which could be a long-term source of lucrative advertising revenue.

And on Thursday, Twitter announced a new partnership with Google that will make the hundreds of millions of tweets that flow through the service every day much easier to find.

The plan, as Twitter executives have told it, is to convince investors that Twitter’s reach far surpasses the number of people who visit the service on the company’s official mobile applications or website. Many people, for instance, view tweets embedded on other websites, like those of Vice, BuzzFeed or The New York Times. They also see mobile advertisements delivered by MoPub, a mobile advertising company that Twitter acquired in 2013.

The new deal with Google could also put millions more tweets in front of people who do not normally use Twitter, though Mr. Costolo cautioned that the Google partnership will not begin for a number of months.

“We have a number of projects in progress to grow our user base and to provide a compelling valuable experience, whether on Twitter or not,” Mr. Costolo said in a call with investors on Thursday.

Twitter has only just started to dabble in making money from tweets that are not on Twitter. Earlier this week, the company announced a new program in which it will serve advertisements attached to tweets that show up on syndicated sites like Yahoo and Flipboard, the mobile news reading app. Mr. Costolo also alluded to a similar type of arrangement with Google, though he did not specify.

Read more: Twitter’s Revenue Grows Despite User Stagnation

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