Slowing User Growth Sullies Twitter Earnings

Twitter on Tuesday beat analysts’ first-quarter earnings estimates, but slower user growth continues to cloud the company’s outlook.
 
Year-over-year, monthly active users (MAUs) rose about 25% to roughly 255 million. That figure failed to please most analysts on Tuesday, because it was markedly less than the 30% user growth that Twitter reported the previous quarter.
 
“Revenue may not be the most important consideration once again this quarter,” Brian Wieser, an analyst at Pivotal Research, wrote in a research note on Tuesday. “If investor reaction plays out as it did last quarter, investors will be overly focused on user growth.”
 
Mobile users, meanwhile, grew by about 31% year-over-year to around 198 million, while Timeline views increased 15% to about 157 billion. Advertising revenue per thousand timeline views reached $1.44 in the first quarter, which represented an increase of 96% year-over-year.
 
Rather than a mainstream product, some analysts continue to portray Twitter as a niche pastime for media elites, celebrities, and their young fans.  
 
Twitter CEO Dick Costolo took issue with this stigma on Tuesday. “Twitter the platform is already mainstream,” he told analysts on an earnings calling, using the case of this year’s Oscars -- when Twitter recorded 3.3 billion views in 48 hours -- to make his point.
 
Revenue for the first quarter grew 119% year-over-year to $250 million, which was better than most analysts’ estimates. Advertising revenue totaled $226 million -- an increase of 125% year-over-year – while mobile ad revenue was approximately 80% of total ad revenue.
 
“With the integration of MoPub [the ad exchange Twitter acquired earlier this year], we now reach more than 1 billion iOS and Android users each month, making us one of the largest in-app mobile ad exchanges in the world,” Costolo stated.
 
Still, Twitter’s growth problem kept analysts and agency heads grumbling on Tuesday.
 
“Revenue is obviously important, but the big issues remain user growth, monthly active users and engagement ... with a slow-growing user base making engagement even more critical,” said Leila Thabet, managing director at social media agency We Are Social US.
 
Worse yet, “Twitter appears to have a rising number of inactive accounts, and more than half of monthly active users never send a tweet or message,” Thabet said. “That means the masses still don’t find the platform easy to use, nor do they have a clear enough understanding of what they can get out [of] it.”
 
Twitter’s domestic unique visitor levels have not improved in any material sense over the past quarter, Wieser suggested on Tuesday, citing comScore data. “Absence of significant growth would be unsurprising to us, given our view of Twitter as a niche consumer proposition in most markets,” he noted.
 
By eMarketer’s reckoning, Twitter’s usership will grow from about 43 million U.S. consumers in 2013 to just 65 million in 2018 -- or about half of Facebook’s current domestic user base.
 
Twitter on Tuesday also reported that data licensing and other revenue totaled $24 million -- an increase of 76% year-over-year -- while international revenue totaled $70 million, which amounted to an increase of 183% year-over-year.
 
All told, international revenue accounted for 28% of total revenue during the first quarter, Twitter reported on Tuesday.

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