April 29, 2014
Twitter stock hits all time low following Q1 report
Despite excellent quarter, investors still concerned about user growth numbers
Despite having what was, in most ways, a stellar first quarter earnings report on Tuesday, Twitter's stock was hit hard. So hard, in fact, that it fell to an all time low in after hours trading. Yikes!
After gaining 4.64%, or $1.79 cents, in regular trading to finish at $42.62 a share, the company gave all that back, and much more. It fell 11.24%, or $4.79, all the way down to $37.83.
The lowest that Twitter's stock has ever closed regular trading lower was in November, when it went down to $39.06.
This continues a worrying trend for the company, which has seen its stock lose a big chunk of value since it released its fourth quarter, and full year, earnings report back in February. At that time it was trading at $65.97 a share, roughly $23 more than it is now.
Both times the stock was rocked by investors who were unhappy with Twitter's user growth numbers.
In the fourth quarter of 2013, Twitter only saw its average monthly active users (MAUs) grow 30% year to year to 241 million, while mobile MAUs increased 37% to 184 million. And those numbers were even worse in this past quarter: MAUs grew only 25% year to year, to reach 255 million.
The news was not all bad: the company actually added more users during this quarter, 14 million, than it had in the previous quarter, when it added 9 million.
That was enough to make Dick Costolo to say, in a conference call after the earnings release, that he was happy with the progress. But that was not enough for investors, as analysts had been expecting MAUs to hit at least 257 million.
The sad thing is that Twitter had a great quarter in every other way, easily beating Wall Street expectations and more than doubling its revenue year to year.
The company posted quarterly revenue of $250 million, up 119% from the same quarter last year, while analysts had been expecting quarterly revenue to be $241 million. Twitter reported non-GAAP EPS of $0.00, which beat expectations of a loss of 3 cents a share.
Almost all of Twitter's revenue came from advertising, which accounted for $226 million, a 125% year to year increase. Data licensing, and other revenue, came to $24 million, an increase of 76% year-over-year.
Excellent numbers or not, if the company cannot find a way to really spark those user numbers, though, its going to be tough to keep investors happy and interested in the long term.
(Image source: urbantimes.co)
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What is Twitter?
Twitter is an online information network that allows anyone with an account to post 140 character messages, called tweets. It is free to sign up. Users then follow other accounts which they are interested in, and view the tweets of everyone they follow in their "timeline." Most Twitter accounts are public, where one does not need to approve a request to follow, or need to follow back. This makes Twitter a powerful "one to many" broadcast platform where individuals, companies or organizations can reach millions of followers with a single message. Twitter is accessible from Twitter.com, our mobile website, SMS, our mobile apps for iPhone, Android, Blackberry, our iPad application, or 3rd party clients built by outside developers using our API. Twitter accounts can also be private, where the owner must approve follower requests.
Where did the idea for Twitter come from?
Twitter started as an internal project within the podcasting company Odeo. Jack Dorsey, and engineer, had long been interested in status updates. Jack developed the idea, along with Biz Stone, and the first prototype was built in two weeks in March 2006 and launched publicly in August of 2006. The service grew popular very quickly and it soon made sense for Twitter to move outside of Odea. In May 2007, Twitter Inc was founded.
How is Twitter built?
Our engineering team works with a web application framework called Ruby on Rails. We all work on Apple computers except for testing purposes.
We built Twitter using Ruby on Rails because it allows us to work quickly and easily--our team likes to deploy features and changes multiple times per day. Rails provides skeleton code frameworks so we don't have to re-invent the wheel every time we want to add something simple like a sign in form or a picture upload feature.
How do you make money from Twitter?
There are a few ways that Twitter makes money. We have licensing deals in place with Google, Yahoo!, and Microsoft's Bing to give them access to the "firehose" - a stream of tweets so that they can more easily incorporate those tweets into their search results.
In Summer 2010, we launched our Promoted Tweets product. Promoted Tweets are a special kind of tweet which appear at the top of search results within Twitter.com, if a company has bid on that keyword. Unlike search results in search engines, Promoted Tweets are normal tweets from a business, so they are as interactive as any other tweet - you can @reply, favorite or retweet a Promoted Tweet.
At the same time, we launched Promoted Trends, where companies can place a trend (clearly marked Promoted) within Twitter's Trending Topics. These are especially effective for upcoming launches, like a movie or album release.
Lastly, we started a Twitter account called @earlybird where we partner with other companies to provide users with a special, short-term deal. For example, we partnered with Virgin America for a special day of fares on Virginamerica.com that were only accessible through the link in the @earlybird tweet.
What's next for Twitter?
We continue to focus on building a product that provides value for users.
We're building Twitter, Inc into a successful, revenue-generating company that attracts world-class talent with an inspiring culture and attitude towards doing business.
Dick Costolo
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