Twitter takes hit as user growth falls short of hopes
By Glenn Chapman, AFP
February 7, 2014, 12:01 am TWN
SAN FRANCISCO -- Twitter got a reality check Wednesday as the high-flying messaging company reported modest user growth during a quarter in which it lost US$511 million.
Even more disconcerting, in the eyes of some industry watchers, was that the typical amount of time people spent checking out timelines actually dropped.
"If you don't have an engaged user base, you don't have a business," Forrester analyst Nate Elliott told AFP.
"They have got to do better on users, that is the entire story."
Twitter makes money from ads in the form of "promoted tweets" in timelines, and it needs strong growth to keep its momentum.
Twitter shares skidded more than 17 percent to US$54.16 in after-hours trades that followed its first quarterly earnings release since its stock market debut last year.
Twitter problems include going from being seen as an online venue for quick fame to being viewed as a global platform for infamy, according to analyst Rob Enderle of the Enderle Group in Silicon Valley.
Attention has been shined on people losing jobs or facing ridicule for Twitter posts.
In a recent example, a television star came under heavy online fire for a joke he tweeted playing off the death of actor Philip Seymour Hoffman.
"When people started getting destroyed by what they posted, people started looking at using the service as stupid," Enderle said. "And stupid is not status."
The results showed revenues in the quarter that ended Dec. 31 doubled from a year ago to a better-than-expected US$242.6 million.
The number of worldwide users was up just nine million from the figure of 232 million when Twitter went public in November, suggesting only modest growth at a time when investors were looking for a surge.
In its first earnings report as a public company, Twitter said the loss for the year widened to US$645 million from US$79 million in 2012, even as revenues more than doubled to US$664 million for the full year.
The San Francisco-based firm said advertising brought in US$220 million in the quarter, an increase of 121 percent year-over-year, with mobile accounting for more than 75 percent of total.
Twitter shares soared from the offering price last November of US$26, and analysts say that to sustain that momentum Twitter must prove it can grow and move toward profitability.