The same old song: Twitter slammed again on slow user growth

Steven Loeb · October 27, 2015 · Short URL:

Despite easily beating expectations, Twitter adds only 4M MAUs, stock drops over 11%

There has been a ton going on over at Twitter over the last few months, with a shakeup in leadership, big layoffs and a stock that has been falling.

Now comes the first test for Jack Dorsey, who took over as CEO in an interim status in July before being named permanently to the position last month. This is the first full quarter where he has been at the head of the company.

Shares of Twitter have dropped over 11 percent in after hours trading, following the release of the company's third-quarter earnings report, erasing the day's gains and then some. The stock had risen 1.46%, or $0.45 to $31.34 a share during regular trading on Tuesday.

Twitter reported Q3 revenue of $569 million, up 58% year-over-year. That beat its own forecast range of $545, and also beat analyst expectations of $559.6 million.

$559.6 million, up 61% year-over-year, and above the previously forecast range of $470 million to $485 million. It was also much higher than the $481.28 million that Wall Street had been expecting. It also reported non-GAAP EPS of $0.10, beating the $0.05 expected by analysts.

So what is the troubling investors? As usual, its weak user growth

Average Monthly Active Users (MAUs) were 320 million for the third quarter, up 11% year-over-year, and compared to 316 million in the previous quarter. Excluding SMS Fast Followers, which are users who people who sign up and access Twitter only through text message, MAUs were significantly lower, 307 million, for the third quarter, up 8% year-over-year, and compared to 304 million in the previous quarter.

By comparison, in the second quarter, the company had added eight million new users, including SMS Fast Followers.

For this quarter, mobile represented approximately 80% of total MAUs.

“We continued to see strong financial performance this quarter, as well as meaningful progress across our three areas of focus: ensuring more disciplined execution, simplifying our services, and better communicating thevalue of our platform,” Dorsey said in a statement. “We’ve simplified our roadmap and organization around a few big bets across Twitter, Periscope, and Vine that we believe represent our largest opportunities for growth.”

Once again, almost all of Twitter's revenue came from advertising, which accounted for $513 million, an increase of 60% year-over-year. Excluding the impact of year-over-year changes in foreign exchange rates, advertising revenue would have increased 67%. Mobile advertising revenue was 86% of total advertising revenue.

Data licensing and other revenue totaled $56 million, an increase of 37 % year-over-year. Of Twitter's total revenue, $199 million was international, an increase of 65% year-over-year.

Twitter is expecting revenue in the range of $695 million to $710 million for the fourth quarter of 2015, and adjusted EBITDA is projected to be in the range of $155 million to $175 million.

Stayed tuned as we will be covering Dorsey's first earnings calls as full-time CEO of Twitter.

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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, 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, 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 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.