Twitter’s maiden earnings report showed strong Q4 growth in mobile users and advertising revenue, but a higher-than-expected net loss – and a slowdown in usage – was enough to spook investors. Nearly a fifth of Twitter’s stock market value was wiped out following the Q4 announcement.
Buoyed by growth in mobile advertising sales, Twitter reported a 116 per cent jump in Q4 revenue, year-on-year, to $243 million.
Of that sum, advertising revenue – of which mobile advertising accounted for 75 per cent – was $220 million. That’s up 121 per cent from the same quarter in 2012.
Twitter’s management enthused about the top-line performance, which, according to Reuters, beat analyst expectations.
“Twitter finished a great year with our strongest financial quarter to date,” said CEO Dick Costolo.
Mike Gupta, CFO, anticipated that advertising revenue would grow strongly.
“Advertisers are increasingly recognising that conversations on Twitter provide a valuable opportunity to connect with consumers on Twitter in real time and in Q4 we saw a record number of retailers flock to Twitter to do just that,” he said, quoted by Reuters.
Investors were nonetheless rattled by a hefty net loss and a slowdown in growth in the number of monthly active users (MAUs) and a fall in timeline views (a key advertising metric).
Twitter racked up a net loss of $511.5 million during Q4, a massive jump from the relatively small net loss of $8.7 million in Q4 2012. Bloomberg said the loss was more than double analysts’ projections of $253.5 million.
Twitter attributed much of the red ink to stock-based compensation expenses.
And while the number of MAUs continues to grow, the pace of growth is slowing.
Average MAUs were 241 million as of 31 December 2013, a year-on-year increase of 30 per cent. Mobile MAUs showed even stronger growth, registering 37 per cent year-on-year growth to reach 184 million.
Between Q4 2012 and Q4 2011, however, MAU growth was 39 per cent. More worryingly, during Q4 2013, Twitter saw only a miserly 4 per cent increase in average MAU numbers compared with the previous quarter.
“This was taken very badly [by investors] as the user count is the only real handle that the market can use to ascertain what the future growth of the company will be,” said Richard Windsor, formerly a technology analyst at Nomura and founder of Radio Free Mobile.
Another concern is timeline views fell for the first time on a sequential basis. There were 148 billion views in Q4, down from 159 million the previous quarter (and 151 billion in Q2).
The home timeline is the long stream of Tweets from those followed by the user.
“I can see revenue growth to $2 billion [which it should hit in 2016] but beyond that I am really struggling,” added Windsor. “This is because, at the end of the day, Twitter is basically text messaging and this function has a limited level of usage when compared to what users do on mobile devices.”
Twitter’s full-year 2013 revenue reached $664.9 million, up from $316.9 million the year before.
The firm projects Q1 2014 revenue to be in the range of $230 million and $240 million. Full-year revenue guidance is in the range of $1.15 billion and $1.2 billion.