While attracting new users has been a major challenge for Twitter, there has been one bright spot for it; the ability of wringing as much advertising revenue as possible via messages that are shown to people who are using its service. However, the growth in ads seems to be faltering because of the increased competition it is facing from rivals like Facebook and the same seems to be happening to its stock. Weaker-than-expected results on Twitter earnings were posted by Twitter for the first quarter on Tuesday and also informed Wall Stress to reduce its expectations for the entire year. Financial analytics firm called Selerity posted the report early on Twitter.
There was an 18% fall in Twitter’s share price after the report went public. Twitter itself had planned to release this report after the closing of the market, but was forced to rush it when the leak occurred. Investors were shocked with the slowing growth in its revenue who have been relying on its strong performance for offsetting the trouble that had been encountered by the microblogging service in attracting additional users. There doesn’t seem to be any notable improvement in user growth and now even monetization isn’t meeting the expectations.
However, analysts were of the opinion that it couldn’t as yet be determined how much this was because of Twitter’s own missteps and the role being played by rivals like Snapchat, Facebook and Instagram in terms of advertising. Dick Costolo, the chief executive officer of Twitter, has been targeted with heavy criticism since 2013, after the initial public offering of the company. Calls for his resignation may be renewed amidst news of the poor performance as investors aren’t happy with the report. Analysts said that credibility concerns would have to be addressed by the company eventually as its ad growth potential is limited because of its lack of authenticated and detailed profiles and real-time commercial intent, seen in Facebook and Google respectively.
The microblogging service said that in the first quarter, about 302 million people had used its service at least once. This is in accordance with recent trends and an increase from the 288 million users it had in December. Nonetheless, they were a disappointment for investors who have been rather eager to see good results, especially after some recent changes that Twitter made for making it easier for newcomers to understand the outlook of the service. Most of Twitter’s revenue is derived from advertising and it amounted to $436 in the first quarter.
This was 74% higher than the $250 million, which had been in the same quarter a year ago. But, it was well below the expectations of the analysts, which had been around $457 million. It also lost money in the first quarter, about 25 cents a share, but it reported a profit of 7 cents per share, which was higher than the expectations of 4 cents per share. Mr. Costolo said that the contribution from some direct response products was responsible for the slower revenue growth, but they were confident in creating sustainable growth.