Wednesday, April 30, 2014
Nicole Perlroth writes that Twitter is struggling to convince Wall Street that it is still a company with plenty of potential to grow.
In its second earnings announcement as a public company, Twitter said on Tuesday that it had more than doubled revenues, beating its own forecasts and the expectations of investment analysts. But the social network’s stock fell more than 11 percent in after-hours trading because the number of people who joined it did not increase as fast as many had hoped.
Wall Street, it appears, is more worried about Twitter’s ability to add users and keep them engaged than about its ability to increase revenues.
In the last two quarters, that has been a problem. Twitter said it had 255 million monthly users globally in March, up 5 percent from 241 million at the end of December, which ended a quarter in which monthly active users rose less than 4 percent.
“They need to prove that they can be a very large-sized platform,” said Arvind Bhatia, an analyst with Sterne Agee, an investment firm. “Can they get to 500, 600 million users worldwide? That’s what they have yet to prove.”Continue reading the main story
Twitter’s share price has dropped by nearly a third since its earnings announcement last quarter.
And engagement, a measure of user activity on the site, looked lackluster. On average, users refreshed their Twitter feeds 614 times a month during the recent quarter, up only slightly from 613 times a month in the fourth quarter. Twitter users, especially those overseas, were refreshing their feeds less frequently than they were in the year-ago quarter.
But most disconcerting for shareholders is that Twitter made $1.44 in advertising revenue for every 1,000 timeline views, down from $1.49 in its previous quarter. That may be the best marker of Twitter’s ability to make money from its platform, and in the first quarter it was trending down. In a call with analysts, Twitter’s executives attributed some of that to seasonality because the fourth quarter tends to be the most profitable.
Twitter’s revenue in the first quarter, which ended March 31, was up 119 percent to $250 million from $114 million in the first quarter of 2013. Wall Street had expected Twitter to report revenue of $241 million, according to consensus estimates from Thomson Reuters, while Twitter had forecast slightly lower first-quarter revenues in the range of $230 million to $240 million.
Twitter posted a net loss of $132 million, compared with a loss of $27 million a year ago. Adjusted earnings, however — which exclude stock-based compensation and other expenses — were $183,000, or about break-even per share, compared with a $10.5 million loss a year ago.
In an interview, Dick Costolo, Twitter’s chief executive, tried to reassure skeptics.
“We’re focused on driving up the value of each timeline,” Mr. Costolo said, using a term to refer to users’ Twitter feeds. He noted that “favorites” and “retweets” — two actions users take on Twitter’s site which require an extra click — were up 26 percent in the first quarter and said new users were as engaged as older ones, an indication that the site is not as confusing to newbies as critics contend.