Twitter Finds Itself In Hot Water, And It Has Got To Fix Itself, Soon

Twitter user base and revenue growth Q1 2015

Since its launch, Twitter Inc. (NYSE:TWTR) has established itself as the second most powerful social media network on the internet after Facebook Inc. (NASDAQ:FB). In spite of all its efforts, it couldn’t dethrone Facebook from its numero uno position. Currently, that’s not the area of concern for the micro-blogging platform but Twitter’s Q1 2015 financial results which got leaked on Tuesday before the official announcement, brought much of humiliation and also a disappointment to its investors. Consequently, Twitter saw a drop of 18% in their share value.

Update: Market results for Twitter shares improved eventually during after-hours trading.

Major Concerns for Twitter

Trade pundits and analysts say that the Twitter shares sank due to its low earnings for the first quarter of 2015 as well as lack of guidance. Although, the company reported a revenue of $436 million in Q1 2015 which is increased by 74 percent year-over-year in comparison with Q1 2014, the numbers weren’t at par with company’s own guidance as well as wall street estimation that predicted the revenue to soar to $456.8 million. Twitter generated $0.07 earnings per share using non-GAAP methods while lost $.25 earnings per share using Generally Accepted Accounting Principles (GAAP). However, the street estimated $0.04 EPS for Q1 2015.

In short, Twitter beat the estimated results on profit while missed hugely on revenue. Yet another major concern for Twitter is its user growth which has been quite appalling for the investors as it is not growing at a pace as expected. A rise in monthly active users will eventually result in higher revenue. After witnessing a 4.9 percent increase in the user base in Q1 2015 as compared to the quarter earlier, the investors will be relieved for a while but they are not quite happy with the pace that the progression is heading.

How Twitter is trying to boost its User Growth?

In order to boost user growth, Twitter has introduced some interesting features for its users in the last three months. It launched Periscope, a live streaming mobile app it acquired, which helps users to broadcast live while allowing the followers to interact in real time by commenting and sharing hearts. The app requires “Twitter” login credentials and has been introduced as an iOS App.

Lately, Twitter has been updating its UI for better user engagement. In the last quarter, it launched new-look home page (without login) in order to attract more users. It also partnered with Foursquare in order to introduce more precise location information within tweets.

In order to gain the trust of its investors, Twitter must boost its user growth quickly. The company gained 14 million new users in Q1 2015 with a 4.9 percent rise over the 288 million it reported a quarter earlier. Although it registered an 18 percent jump from the previous quarter year and manages to increase its MAU to 302 million in the last quarter, there’s still a long way to go for Twitter to please the investors.

Twitter’s Plan to Scale Ad Revenue

Besides user growth, Twitter has also taken a couple of remarkable decisions such as acquiring TellApart for $500 million in an all-stock deal and partnership with Google-owned ad platform DoubleClick in an attempt to scale its Ad revenue. With TellApart, an ad tech startup that specializes in cross-device targeting, Twitter is eyeing to help advertisers to analyze their ROI (Return On Investment) as they can now analyze if their mobile ads are converting into leads or sales across other devices like tablets or laptops.

The partnership with DoubleClick is Twitter’s attempt to rake in Google’s advertiser base by giving them an opportunity to easily buy Twitter ads through the platform. With such partnerships, advertisers can assess the success of their Twitter ads in terms of favorites, retweets, and clicks as these data would now be layered within the DoubleClick campaign data to make things simpler for the advertisers.

With such partnerships, advertisers can assess the success of their Twitter ads in terms of favorites, retweets, and clicks as these data would now be layered within the DoubleClick campaign data to make things simpler for the advertisers.

The other important area of concern with Twitter is the free-flow of tweets on a user’s timeline. On an average, a Twitter user follows 208 people and as of now, Twitter has not implemented any mechanism or algorithm that could filter tweets based on a user’s interest, tweets or conversation. Unlike Facebook, Twitter pushes all the tweets from all the people a user is following. This is creating a cumbersome situation for users and most of the time they are either ending up missing important tweets or have created multiple lists for different purposes.

All in all, these steps from Twitter may bring significant boost in their ad revenue as the advertisers would likely be spending more money while they are targeting results such as website visit, sign up or app install.

Will it work in Twitter’s favor or not, only time will tell. But Twitter is working on its part to scale its user base, as well as revenue for ads.

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