Twitter Beats Q4 Earnings Estimates, User Growth Slower Than Expected

Sure to embolden Dick Costolo’s critics, Twitter once again reported slower-than-expected user growth on Thursday.

During the fourth quarter of 2014, monthly active users (MAUs) were up about 20% year-over-year to 288 million. Since the third quarter, however, MAUs were only up by about 4 million.

Despite the mediocre numbers, Twitter’s CEO insisted that the most recent data showed stronger user growth.

The “MAU trend has already turned around,” Costolo told analysts on Twitter’s earnings call on Thursday.

In the first quarter of 2015, Twitter said it expects to add between 13 million and 16 million users, which would represent a growth rate similar to that experienced in early 2014.

For the fourth quarter of the year, timeline views reached 182 billion, which represented an increase of 23% year-over-year. Ad revenue per thousand timeline views reached $2.37 in the fourth quarter -- an increase of 60% year-over-year.



Meanwhile, Twitter's ad business continues to outperform. During the fourth quarter, revenue was up 97% year-over-year to $479 million on earnings per share of $0.12.

“Financially, we had another great quarter,” Costolo said.

During the quarter, mobile advertising revenue represented 88% of total ad revenue.

Last quarter, Costolo said he was frustrated by Twitter’s rate of product development. Since then, however, Costolo has been “delighted” by the accelerated pace of execution, he said on Thursday.

The social giant has been on a product launch and partnership tear. For starters, Costolo on Thursday confirmed reports that Twitter was working on putting real-time tweets back in Google search engine results. A similar relationship between the two companies lasted from late 2009 through mid-July 2012. 

Among other efforts, Twitter also just began testing a home page designed specifically for users who don't have their own account, and announced plans to expand Promoted Tweets to third-party sites.

Marketing executives said the latter effort was particularly significant. “The sheer scale of [the third-party expansion] changes the way Twitter is measured,” Craig Elimeliah, SVP and director of creative technology at marketing agency RAPP, said on Thursday. “Growing outside of the stream and syndicating promoted tweets on other properties is a game changer.”

Anthony Noto, Twitter's chief financial officer, said on Thursday that he did not expect these recent product launches and partnerships to significantly impact user growth through the first quarter of 2015. 

That could be bad news for Costolo who is reportedly under increasing pressure to step down.

Analysts remain divided about Twitter’s prospects. “Just 18 months ago, Twitter was clearly the [No. 2] consumer social network, but now it appears to have tumbled into fourth place, [while] relative newcomers like Instagram and Pinterest have spent the last year collecting more and more new users,” Forrester Research analyst Nate Elliott said earlier this week.

Earlier this week, however, JPMorgan analyst Doug Anmuth was more optimistic about Twitter’ future. “We are increasingly confident in [Twitter’s] ability to grow users over time,” Anmuth said in a note to investors.

Looking forward, Twitter said it expected revenue to fall in the range of $440 million to $450 million during the first quarter of 2015. For the full year of 2015, Twitter said it expects to generate revenue in the range of $2.3 billion to $2.35 billion.

2 comments about "Twitter Beats Q4 Earnings Estimates, User Growth Slower Than Expected".
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  1. Iman S from MOC, February 6, 2015 at 3:49 a.m.

    Twitter is ranked #8 in worldwide for traffic term (as this comment written). Although Twitter is growing slowly, Twitter is still in the top 3 social media sites.

    Twitter is a must tool to be used for any online business and building good relationship with customers.

  2. Kenneth Hittel from Ken Hittel, February 6, 2015 at 1:51 p.m.

    Nate Elliott's downplaying of Twitter's effectiveness for marketers is on par with his doom-saying last year about Facebook being abandoned by marketers -- yeah, and just as accurate. (Fortunately for themselves, few marketers seemed to have paid any attention to him.) Looking at Twitter in relation to Pinterest and Instagram only or mostly in terms of "more and more new users" shows a startling inability to understand Twitter's raison d'├ętre and value proposition, or those of Pinterest and Instagram, for that matter.

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