Twitter shares fall as growth of monthly users slows

29 Jul 2015 | Author: | No comments yet »

After Killing Twitter Stock Gain, Dorsey Wins Praise.

AP The logo for Twitter adorns a phone post on the floor of the New York Stock Exchange on July 28, 2015. Twitter failed to add users at a quick enough pace for investors in the second quarter even as revenue grew sharply, feeding concerns about whether it can ever become a mass-market service like Facebook or Google.

San Francisco (AFP) — Twitter shares hit the slide on Tuesday as executives warned that the messaging service’s path to mainstream popularity would be a long one.With the stock up on Twitter Inc.’s second-quarter revenue exceeding expectations, the interim chief executive officer didn’t self-congratulate or dwell on past successes but talked bluntly about Twitter’s shortcomings.SAN FRANCISCO: Critics have long lamented that Twitter Inc is difficult to use and has had trouble defining itself, which is why it has not expanded its audience.While Wall Street dumped the stock in after-hours trading on Tuesday, the frank comments by the two executives gave analysts reason to hope the company would start addressing the long-standing problems. “People around the globe know of Twitter, but it’s not clear why they should use Twitter,” Dorsey said during a second-quarter earnings call with investors. “This is unacceptable and we’re not happy about it.” “You’ve got to believe by being bluntly honest about what their issues are, they’re going to be bluntly reactive in solving the issues,” said Debra Aho Williamson, social media marketing and advertising analyst at eMarketer.

Twitter surprised investors with a strong earnings report on Tuesday, even as the company searches for a permanent CEO and faces ongoing challenges growing its user base. Photo: Richard Drew San Francisco – Twitter executives had a clear message for investors on Tuesday: We have a lot of work to do, and don’t expect great progress anytime soon. Twitter on Tuesday reported that it lost $137 million in the recently ended quarter on revenue that jumped 61 percent to more than half a billion dollars.

Dorsey said Tuesday that while the results show ”good progress in monetization,” the company is ”not satisfied” with the growth of its audience. But its shares dropped sharply after the 5 pm start of a conference call with analysts, where Dorsey and Noto continually criticized the company’s disorganized product execution and inability to provide new users reasons to sign up for the site. In a closely watched figure, Twitter said that the number of people using the one-to-many messaging service monthly climbed 15 percent to 316 million compared to the same three-month period a year earlier. On a live-stream via the Twitter-owned Periscope app, Dorsey began by expressing frustration with the company he co-founded, saying product announcements “have not yet had meaningful impact on growing our audience,” which he called “unacceptable.” He also said Twitter hasn’t “done a great job at aligning the entire company” around its strategy.

They also said new product initiatives, such as instant timelines and improving the experience for those without Twitter accounts who visit the site, have not yet helped grow the audience. The majority of those additional monthly users were people in emerging markets who signed up to get updates from selected Twitter accounts via text messages sent to feature phones. “We are planting the seeds in these markets today,” Noto said, reasoning that as smartphones gain traction in those places people will trade-up to more engaging Twitter experiences which bring with them more opportunities for the company to make money.

As Dorsey works to update Twitter’s offerings to attract a broader range of users, its sales team has been making deals – such as one with Google – to help advertisers use the site more effectively. That goal will involve carefully tinkering with the real-time flood of tweets that has been part of Twitter’s identity from the outset, according to Dorsey. “In order to realize Twitter’s full potential, we must improve in three key areas: ensure more disciplined execution, simplify our service to deliver Twitter’s value faster, and better communicate that value.” Twitter took in $502 million in revenue during the recently-ended quarter, most of the money coming from ads on mobile devices used to access the service, according to the earnings report. If he stays in the top job at Square, he could soon regularly be speaking to Wall Street: The mobile-payments company, which he also co-founded, has filed a confidential registration to go public, sources familiar with the matter have said. Twitter forecast that revenue in the current quarter would range from $545 million to $560 million, and that it would wind up taking in $2.2 billion to $2.27 billion in revenue for the full year.

Users of the main application rose by just 2 million from the prior quarter – a gain of less than 1 percent. “Investors demand a re-acceleration of user growth,” said Paul Sweeney, an analyst at Bloomberg Intelligence. “We did not see that this quarter to any notable degree.” The stock dropped as low as $31.90 in late trading. Twitter did not offer criticisms that have not been heard before, analysts said, but Dorsey and Noto’s acknowledgement of the problems may mean they are more aggressively seeking solutions. “They made those remarks with full disclosure in mind,” said Ken Sena, Evercore ISI analyst. “They were giving investors a sense of the challenge.” For some, he vastly improved his grade. “He provided one of the most cohesive explanations of Twitter’s mission as well as challenges we’ve heard in a long time,” said James Cakmak, with Monness Crespi Hardt & Co. Dorsey, in addition to stepping in at Twitter, leads Square, a growing mobile payments company that is rumored to be planning an initial public offering.

For his part, Dorsey said afterward in an interview that he enjoyed his debut. “I relish any opportunity to tell our story,” he said. “I think we are communicating where we are presently, that we understand our challenges ahead.” One of his recent television appearances, on CNBC in June after the announcement of his return to Twitter, got one-star reviews — and not only because he sported a full mountain-man beard, which even his mother disapproved of, with a post on Twitter. Former Twitter CEO Dick Costolo was replaced this month on an interim basis by co-founder Dorsey, who also runs Square Inc, a mobile-payments company.

User growth has been an ongoing challenge for Twitter, as it tries to make its service a widely used product rather than a niche short-messaging service popular with journalists, celebrities and young people. In the interview, he dodged questions about whether he wants to head Twitter or stick around at Square, saying, “I’m going to do what I think is best for both companies.”

Noto said Twitter changed its tone on the call because growth slowed so meaningfully, the company wanted to explain how it’s working to address the deceleration. “In the past we may not have had the growth that investors wanted us to have, but it was still quite strong. In the time since Twitter went public in November 2013, growth has stagnated while rival social applications, including WhatsApp and Facebook Messenger, drew hundreds of millions more people. One current plan, internally named Project Lightning, is meant to create channels for whatever is happening live, including videos running simultaneously with what’s showing on television. Todd Jackson, who helped Twitter debut its Highlights product, is leaving for Dropbox., while Christian Oestlien, who helped drive growth, is going to Google’s YouTube.

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