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ECommerceTimes.com

Twitter Takes It on the Chin

By Quinten Plummer
Apr 30, 2015 1:18 PM PT
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Twitter's stock took a hit when investors got an early look at first quarter earnings, leaked just ahead of closing time on Tuesday, ahead of the company's Wednesday announcement.

Shares plummeted about 18 percent from Tuesday's opening price of US$51.84. The slide continued on Wednesday, with the loss of a couple more percentage points, and the share price hovered near that level through Thursday, closing at $38.96.

Wall Street's disillusionment was due to Twitter's continued struggle to attract new users and generate more ad revenue.

In the three-month period starting Twitter's 2015 fiscal year, the company fell shy of expectations, with revenue of $436 million falling $4 million shy of the low end of its forecast range. Twitter accumulated $388 million in ad revenue, with mobile advertising accounting for about 89 percent of that figure.

While its first-quarter earnings fell just short of targets, the more worrying issue for many investors was Twitter's tempering of expectations for the rest of the year.

Twitter's guidance on revenue was lowered from $2.3 billion to $2.35 billion on the year, down to $2.17 billion to $2.27 billion.

It was ironic that the bad news was leaked via a tweet, said Bryan Nonni, an account coordinator at mRELEVANCE.

"It's almost like a conspiracy by Twitter," he told the E-Commerce Times. "Leak your information via a tweet, take a hit in the short term, and rebuild long term once people realize that value. Millions have been made by investors and Wall Street traders based on information gathered by those 140 characters."

Truck in the Mud

Twitter's 302 million average of monthly active users over the last quarter was 14 million more accounts than the previous three-month period.

While Twitter has been adding new users, the worry has been over the decelerating rate at which it has been doing so. Those 14 million more users were about an 18 percent increase over the previous quarter, but that period's count of monthly active users was about 20 percent more than the prior three-month average.

Twitter has been struggling to move at the speed of expectations because many people still aren't quite sure what the platform is supposed to be, according to James Quin, CDM Media's senior director of content and C-Suite Communities.

In general, people still think of Twitter as a social network that aims to serve up news about all of each individual's connections, he said.

"That's not what it is -- that's what Facebook is," Quin told the E-Commerce Times. "Twitter instead is a highly customized and highly personalized news feed. Twitter isn't about building a community -- again, that's Facebook. It's about getting insight from people that specifically aren't in your community."

New Roads

Twitter's problems with user engagement stems from tweets, the public's misconception of them, and the abundance of junk messages, according to Quin. The copious amounts of empty tweets makes it harder for users to find the gems, and it gives the impression that everyone should be tweeting.

"TV watchers don't produce TV shows, magazine readers don't publish magazines, so why do Twitter users have to tweet?" asked Quin.

While the leaked report undermined Twitter's chance to put a spin on the off-target results, the company already has acknowledged that it has more logged-out users than it likes, and it has promoted its video services as bait. The issues with ad revenue, however, emerged as a new problem for Twitter.

Advertisers will have a much better reach on Twitter once the company fully leverages Mopub, said Michael Hussey, CEO of StatSocial.

It's been about a year and a half since Twitter acquired the mobile ad platform, he noted. However, Twitter's integration with Google, expected in May, could be as important or more so than the Mopub functionality.

Twitter's declaration that it was the world's top real-time search engine was grounds for excitement, said Hussey. When news breaks, he turns to Twitter before Google.

"If search was easier and more pronounced as a Twitter function, millions more people would be using the platform this way," he maintained. "Perhaps the partnership with Google will bring those capabilities to a far wider audience."


Quinten Plummer is a longtime technology reporter and an avid PC gamer who explored local news for a few years, covering law enforcement and government beats, before returning to writing about things run by ones and zeros and the people who make them. If it pushes pixels or improves lives, he wants to learn all he can about it.


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