News Column

Twitter shows big revenue boost but slowing user growth

February 5, 2014

By Brandon Bailey, San Jose Mercury News

Feb. 05 -- SAN FRANCISCO -- Twitter turned in a strong financial performance during its first quarter as a public company, but it revealed slowing growth numbers that drove the stock down sharply in late trading Wednesday. Shares in the micro-blogging service fell more than 16 percent after the company said user growth slowed to 4 percent at the end of 2013, compared with the previous quarter. Twitter's stock had soared more than 150 percent after the company debuted on Wall Street last November, as many investors bet on its potential as an online advertising business that could rival the much larger Facebook . The company reported 241 million active monthly users for the fourth quarter, up from 232 million in the third reporting period, but its rate of user growth has been dropping steadily. "It's important that they ramp up those metrics," said Arvind Bhatia , an Internet stocks analyst for Sterne Agee , although he added that Wednesday's plunge "is not totally surprising for a stock that had run up so high." Twitter CEO Dick Costolo acknowledged the issue during a conference call with analysts, while insisting he was pleased with the company's strongest financial quarter since it was founded in 2006. "We will continue to make the product easier for new users to use," Costolo said, in a nod to critics who contend Twitter is often daunting for new users because of its format and unfamiliar conventions, like the use of hashtags and other symbols in text messages of no more than 140 characters. The company has introduced new features that emphasize visual images, direct messaging between users and the ability to search for conversations based on topics. Costolo promised more such features, which he said will "make it easier for a broader audience to get Twitter, to understand Twitter more quickly." Twitter has also introduced new ad products to help advertisers target specific audiences and measure the effectiveness of their messages. The company reported a net loss of $511 million on sales of $243 million for the quarter ending Dec. 31 , which was more than double its quarterly revenue of $112 million a year earlier. Earnings and revenue were better than many analysts expected, but Twitter projected slower revenue growth in 2014. The loss wasn't surprising, since young companies traditionally spend heavily on infrastructure and hiring. But after closing Wednesday at $65.97 , the stock fell below $55 in late trading after Twitter issued its report. Follow Brandon Bailey at Twitter.com/BrandonBailey or google.com/+BrandonBaileyOnline or on Facebook at http://on.fb.me/ULIOfb ___ (c)2014 the San Jose Mercury News (San Jose, Calif.) Visit the San Jose Mercury News (San Jose, Calif.) at www.mercurynews.com Distributed by MCT Information Services


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Source: San Jose Mercury News (CA)


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