Revenue increases at Twitter, but growth is a worry

May 01 2014, 17:56 IST
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SummaryIn its second earnings announcement, Twitter said on Tuesday it had more than doubled revenues, beating its own forecasts and analyst expectations.

In its second earnings announcement, Twitter said on Tuesday it had more than doubled revenues, beating its own forecasts and analyst expectations. But the network’s stock fell over 11% in after-hours trading because the number of people who joined it did not increase as fast as 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% from 241 million at the end of December, which ended a quarter in which monthly active users rose less than 4%.

It remains to be seen whether Twitter can replicate Facebook’s success with ads that appear on your phone urging you to install an app or fire up one you haven’t used in a while. “They need to prove they can be a large-sized platform,” said Arvind Bhatia, analyst with Sterne Agee, an investment firm. “Can they get to 500, 600 million users worldwide?”

And engagement, a measure of user activity on the site, looked lacklustre. 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.

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