Never forget that while investors can giveth, investors can just as easily taketh away.
After Twitter posted better than expected revenue and earnings per share in its second quarter earnings on Tuesday, not to mention beating analyst expectations when it came to user growth, things looks liked they were finally going well for the beleaguered company.
Now, after comments from chief financial officer Anthony Noto in a conference call following that release, the company has given away all of its gains. and then some.
“As I noted throughout the quarter, MAUs in Q2 did not benefit from the same factors that benefited Q1. Specifically, we did not see organic growth, positive seasonality, or growth initatives seen in Q1,” he said during the call.
“We’re obviously not satisfied with these results. In the couple of months since assuming responsibility to lead marketing, we’ve done a deep dive into the issues driving MAUs and usage, and are developing a marketing strategy and plan to address this.”
Despite enormous brand awareness, over 95% around the globe, Twitter has only been able to achieve less than 30% penetration in these markets.
“This low level penetration implies that we’ve only reached early adopters and technology enthusiasts, and we have not yet reached the next cohort of users, known as the mass market,” said Noto.
“We believe the reason is that we have failed to do two critical things. First, we have not clearly communicated Twitter’s unique value. That’s reflected in everything we do, across product, content and marketing, and, as a result, non-users continue to ask, ‘Why should I use Twitter?’ Additionally, we have not delivered on meeting the new potential users expectations of of Twitter when they try the product. Simply said the product remains too difficult to use.”
So far, this is just a critique of the company and the product, and one that I’m sure that others have had. No harm, no foul. Then he went further.
“We’re working as rapidly as we can to put us in a position to launch an integrated marketing strategy and marketing campaign before the end of 2015,” Noto said. “To be clear, however, we do not expect to see sustained, meaningful growth in MAUs, until we start to reach the mass market. We expect that will take a considerable period of time.”
And, with that, Twitter’s stock dropped like a stone. It is now down over 10% in after hours trading, after its stock had gone up over 5% in regular trading, and another 6% in after hours trading. Just like that, it was gone.
Ironically, this happened after Twitter, finally, saw some good news on the MAU front.
Average Monthly Active Users (MAUs) were 316 million for the second quarter, up 15% year-over-year, and compared to 308 million in the previous quarter. That beat the 310 million that analysts had been expecting.
The larger-than-expected increase comes from the company’s new practice of counting so-called SMS Fast Followers, which are users who people who sign up and access Twitter only through text message. Without those users, MAUs were 304 million for the second quarter, up 12% year-over-year, and compared to 302 million in the previous quarter. Mobile represented approximately 80% of total MAUs.
In addition to those comments, Dorsey was also asked by Mark Mahaney of RBC Capital how the search for the next Twitter CEO was going. Dorsey’s answer was, pretty much, that they don’t have anything to share right now.
“I know this is a trending topic around Twitter, the CEO search, but unfortunately we do not have an update to provide today. The search committee does feel the urgency of the search, but it is doing its work to make sure we arrive at the best answer. And we’ll have updated when there’s something meaningful to share.”
(Image source: blog.everythingdriving.com)
