Expectations were running high ahead of Twitter’s maiden earnings as a public company – its stock had risen by almost 50 per cent since November’s IPO.
But investors got the jitters when they saw slowing growth in user numbers and engagement rates in the fourth quarter of 2013, feeding their fears that Twitter might be a niche product which the mass market will never understand. Dick Costolo, chief executive, stressed this was a problem they had always known about and had a plan to fix. Nonetheless, shareholders were not comforted, sending Twitter shares down almost 18 per cent in after-hours trading.
In this liveblog, Hannah Kuchler and Tim Bradshaw covered reaction and live commentary from the conference call.
Here’s Twitter’s user-growth chart that seems to have spooked the market:
If you’re keen to ask your own questions of Twitter, the company which helped democratise global communications, will be considering questions from anyone using the hashtag “#TWTRearnings” and tweeting to its investor relations account @TwitterIR.
Our story is live:
Shares in Twitter slumped in after-hours trading in New York despite the messaging platform beating expectations in its first earnings announcement as a public company.
The stock – which has more than doubled since November’s initial public offering – fell as much as 14 per cent as investors took fright at slowing user growth and engagement, even though revenue and the loss were better than expected.
Monthly active users grew less than 4 per cent quarter-over-quarter to 241m while timeline views, a measure of engagement, fell from 159bn in the third quarter to 148bn in the fourth quarter.
Worth remembering that even now down at $58, Twitter is still at more than double its IPO price of $26 a share.
The Twitter earnings conference call is just starting.
At the start of the call, the stock is down about 11.5 per cent… Let’s see if the commentary can calm the markets at all.
A lot could be gained or lost by the commentary in this call. Here’s a preview of what we’ll be looking for:
30 minutes of presentations before Q&A! get comfy…
Here are some of the questions people have asked on Twitter:
Here comes CEO @dickc. He’s starting with “what Twitter is and what makes us unique”, which he talked about on the IPO roadshow. “Democratising content creation and distribution… A single voice to echo around the world, authentic and unfiltered…. When events happen, the event itself and the conversation around the event happen on Twitter.”
Dick: “We are doubling down in 2014 to accelerate the growth of our core user base.”
Dick knows what will have worried the market. He says he’s starting with the user growth.
Early signs user interaction is up more than 35 per cent since launching new features in the fourth quarter.
Costolo has said search is up 120 per cent year-over-year.
Twitter has been clear that it wants to make it easier to join the site, especially on mobile, and ways of engaging inactive users.
Rebooting user growth is going to take a while, says Costolo: “It will be a combination of changes introduced over the course of the year that we believe will start to change the slope of the growth curve.”
Costolo tells investors that design changes to threading conversations mean timeline views are worth more but there are fewer of them.
Q4 ad product improvements: targeting, online self service, tracking response rates, targeting TV conversations and international expansion. “We have many more important launches coming in 2014.”
Costolo said the international expansion of self serve advertising in the UK, Canada and Ireland is “already off to a great start”.
“In 2014 we are focused on building a Twitter that is truly accessible and valuable to everyone.”
Costolo says that more integrated media, improved conversations and messaging features will attract more users and deepen engagement. Let’s remember that messaging apps such as Whatsapp, Line, Snapchat and Kik are becoming a real competitor to Twitter here. Whatsapp alone says it has more than 400m active users, compared with Twitter’s 241m.
More on product plans: “We want to do a better job organising our content on topical lines as well as on chronological lines – to make Twitter easier to use for everyone.” Twitter will become “more satisfying” to both new and existing users over the course of the year, he promises.
Now over to Mike Gupta, CFO
Saw significant increase in ad engagements as they introduced media cards.
MoPub, the mobile advertising platform, contributed $8m in revenue.
Gupta says the company continues to be “very conservative” in the number of ads it shows its audience. Doesn’t want to put them off.
Costolo seems to be convincing at least a few investors that he has a credible plan to boost user growth – Twitter stock is now down “only” 9 per cent after hours, from a nadir of 14 per cent earlier.
Expenses rose as hiring soared – ended the year with about 2,700 employees.
Adjusted ebitda margin was 18 per cent in the fourth quarter. Twitter’s investor roadshow video showed they are targeting a 40 per cent margin.
Monthly active users rose more slowly in the US than internationally – up 4 per cent in the US and up 3 per cent in the rest of the world quarter-on-quarter.
Twitter did particularly well on Black Friday and Cyber Monday. Large brand advertisers in consumer products, retail and financial services find conversations on Twitter particularly helpful.
“In 2014 we will reach many more people,” promises Dick Costolo.
“We have only scratched the surface of what we believe Twitter can become.”
Now onto Q&A
First question is from Goldman Sachs, who led the IPO. He’s asking about timeline growth.
Costolo: “Until last year our growth has been viral and organic – growth was something that happened to us. We’ve launched a few things in Q4 that really started to get that flywheel of increased user interaction going – eg favourites and retweets up 35%.” That gives him confidence, he says, that the company can reach every connected person.
“We don’t think we need to change anything about the characteristics of our platform – we just need to make Twitter a better Twitter.”
Costolo also outlines his plans to take on the chat apps (not that he puts it like that). He says sometimes it is good to whisper to people in the town square, a favourite metaphor for Twitter, so building more private messaging will attract more users and deepen engagement.
Another question about driving accelerating monthly active users.
Dick again talks about the Twitter’s better infrastructure allowing it to test many more things and analyse the results of those experiments. “I really think of it as the collection of these things that we want to do over the arc of the entire product over the course of the year that will deliver the change in the slope of the growth curve that we want to see.” He seems to be saying – hoping? – that monthly active users aren’t the only figures investors should be looking at.
Mike Gupta said strength across all advertisers from large to small. Benefits from starting with the Ad Age 100, virtually all on the platform, but now concerted effort to move down to middle market and SMBs with better targeting and the self-serve platform roll out.
Timeline views are just one measure of engagement, Costolo says. Gupta says there will be fluctuations as they experiment with the products which will drive both user growth and engagements. High quality timelines.
Now Twitter is taking questions off Twitter!
Costolo said it was well known that Twitter hired Nathan Hubbard from Ticketmaster to explore commerce opportunities. He said commerce already takes place all the time on Twitter, some of them are activities Twitter has engaged in with partnerships with American Express and Starbucks, others brands are doing by themselves. He hints that Twitter commerce will use media cards – rich tweets that encourage interaction – but says no current timeline to roll it out.
Wall Street is back in the dumps as the call goes on. Twitter stock now down more than 15 per cent.
Gupta won’t comment on ad load – Facebook has limited it to 5 per cent, that’s one in 20 posts.
Analyst says looks like 14 per cent margins at the midpoint of the guidance, up a few points from 2013. How will that change this year?
Gupta says that investment will continue on infrastructure, international rollout and products. “We will absolutely continue to invest in the near to medium term.”
Interesting investors are not crazy excited by Twitter commerce. Maybe they had hoped for more concrete details after plans leaked last week: https://twitter.co…431195853961691137
Dick is again having to defend user growth – the “cumulative effect” of changes made over the course of the year will improve it, but he doesn’t know exactly when the chart will tick up.
Costolo: “We have massive global awareness of Twitter. we need to bridge that gap of awareness and deep engagement on the platform. It is very much about making it easier for people who first come to the platform to get it more quickly.” That means on the first day, not the first months.
Gupta: last 18 months to two years advertisers have gone from “why advertise on Twitter?” to “how do we advertise on Twitter?”. They like the return on investment stats and using the site as a companion to “life in the moment”. We’re giving them improved tools to see that ROI.
After Facebook said it was going to do lots of standalone apps, Twitter is asked whether it will too. Twitter #Music didn’t do too well on that basis but Vine isn’t doing too badly.
Costolo address the “one app, multiple app” question. Facebook is going the multiple app route.
He says there will not be one social app that wins everything. Twitter is the best product in the world for real time, in the moment, discovery. Short form format drives fast consumption. The place information breaks first. The second screen to TV and any experience in the world.
So… said he is not religious about one way or another. Can see some use cases which might work for standalone apps.
Fair to say Dick’s answer on that was a teeny bit more than 140 characters long.
Now down 17%
More video coming to Twitter? Oh yes, says Costolo.
In the mobile world, display ads can no longer be an interruption due to the small real estate available. The ad has to be content that’s relevant to the users. Marketers are starting to get that, he says.
(That said, advertisers need educating about Twitter just as much as new users.)
Dick is starting to sound a bit distracted. Does he have a screen with the stock price in front of him?
Dick ends the call by thanking users and says he looks forward to chatting to analysts again in three months’ time. “Mom if you are on the call I promise to call sooner than that.”
He used to do improv comedy, you know.
(Yes, we know you know that by now…)
Wall Street, however, is not amused. As the call ends, Twitter stock is down almost 18 per cent.
A parting tweet from the CFO.
Some analysts are miffed they didn’t get to ask their questions.
Facebook stock is down 2 per cent after-hours too, just as Twitter leapt last week when FB reported its sparkling earnings. Facebook, lest we forget, is both much bigger and growing faster than Twitter.
While we’re on the subject of Facebook, here’s a flashback from mid-2012:
Facebook stock has tumbled to a new low in after-hours trading, as its first quarterly earnings as a public company underwhelmed investors.
3.06pm And so concludes Facebook’s first earnings call. In after-market trading, its shares are still down by more than 10 per cent at $24.12, the stock’s lowest point yet.
Facebook’s share price now? $62.19.
Until next time…