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Twitter stock nosedives over 18% as revenue falls far short of analyst expectations
Shares of Twitter went into freefall on Tuesday, dropping over 18% in regular trading after its first-quarter earnings reportedly leaked, showing the company badly missing expectations with $436 million in revenue, while analysts wanted to see $457 million.
Sadly for Twitter, those reports turned out to be accurate.
The company did, however, reported non-GAAP EPS of $0.07, beating the $0.04 expected by analysts. So at least there's that.
"While we exceeded our EBITDA target for the first quarter, revenue growth fell slightly short of our expectations due to lower-than-expected contribution from some of our newer direct response products," Dick Costolo, CEO of Twitter, said in a statement.
"It is still early days for these products, and we have a strong pipeline that we believe will drive increased value for direct response advertisers in the future. We remain confident in our strategy and in Twitter's long-term opportunity, and our focus remains on creating sustainable shareholder value by executing against our three priorities: strengthening the core, reducing barriers to consumption and delivering new apps and services."
Twitter also continued to struggled in the one area that has been giving it trouble in recent quarters: user growth.
In the first quarter, Average Monthly Active Users (MAUs) were 302 million, up only 18% year-over-year and compared to 288 million in the previous quarter. Average Mobile MAUs represented approximately 80% of total MAUs.
Once again, almost all of Twitter's revenue came from advertising, which accounted for $388 million, an increase of 72% year-to-year. It would have been 78% if not for foreign exchange rates. Mobile advertising revenue was 89% of total advertising revenue.
Data licensing, and other revenue, came to $48 million, an increase of 95% year-over-year. Of Twitter's total revenue, $146million, or 34%, was international, an increase of 109% year-over-year.
Twitter now is projecting revenue of between $470 and $485 million, with adjusted EBITDA in the range of $97 million to $102 million, for the next quarter. For the full year 2015, it expects to see revenue between $2.170 billion to $2.270 billion, down from $2.3 billion to $2.35 billion last quarter,, with an adjusted EBITDA in the range of $510 million to $535 million, down from $550 million to $575 million.
In addition to its earnings, Twitter also made two announcements today "aimed at strengthening its direct response capabilities."
First, it entered into a definitive agreement to acquire TellApart, a marketing technology company providing retailers and e-commerce advertisers with unique cross-device retargeting capabilities through dynamic product ads and email marketing.
Second, it announced a partnership with Google's DoubleClick platform to improve advertising performance measurement and attribution for Twitter direct response marketers.
As part of the partnership, Twitter will also make its inventory available through the DoubleClick Bid Manager, making it easier for clients who prefer to centralize their buying through DBM to create and manage campaigns on Twitter.
(Image source: dailygenius.com)
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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.