Twitter misses badly on revenue; shares plummet 12%

Steven Loeb · April 26, 2016 · Short URL:

Twitter's MAUs grew only 3 percent year-to-year, though it did see some growth from Q4

The big question for Twitter in its Q1 earnings was: would it finally be able to break out of its user growth slump? Sadly, it was not the case. While the company did see some quarter-to-quarter growth, it actually added less.

The company had a mixed quarter, posting revenue of $595 million, an increase of 36 percent year-over-year million, but $12 million, and 2 percent lower, than the $607 million that Wall Street had been expected. It reported non-GAAP EPS of $0.15, beating expectations of $0.10 a share.

The less-than-stellar revenue was due to growth from large brand advertisers, which was "softer than expected," according to the company, though brand advertising remains its largest overall conributor to revenue.

"Revenue growth from SMB advertisers was once again the fastest, as we continue to focus on increasing the number of active advertisers we serve."

As a result, its stock tanked over 12 percent in after-hours trading, after gaining 3.89 percent, or $0.67, in regular trading to finish at $117.75 a share.

On top of its revenue miss, it, once again, saw sluggish user growth as well.

Twitter saw its average monthly active users (MAUs) grow a mere 3 percent year-to-year to 310 million, and up only 1.6 percent from 305 million last quarter. That is an improvement from its Q4 report, where user growth was flat quarter-to-quarter. However its annual growth in Q4 had been 9 percent, meaning that number is falling fast. 

The company still has not figured out how to make its user numbers grow, despite finally figuring out a way to monetize logged out users, and doing things to make the service less intimidating to new users.

Mobile MAUs represented 83 percent of the company's total MAUs.

Once again, almost all of Twitter's revenue during the last quarter came from advertising, totaling $531 million, an increase of 37 percent year-over-year. Mobile advertising revenue was 88 percent of total advertising revenue.

Data licensing, and other revenue, came to $64 million, an increase of 34 percent year-over-year. Of Twitter's total revenue, $204 million was international, an increase of 39 percent year-over-year.

For the upcoming quarter, Twitter is projecting revenue of between $590 million and $610 million, with adjusted EBITDA in the range of $145 to $155 million. For the full year 2016, it expects capital expenditures to be $300 million to $425 million, with an adjusted EBITDA in the range of 25 percent to 27 percent.

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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.