The company said it had 284 million monthly active users, about in line with investor expectations. The company reported its third-quarter earnings on Monday
Eric Gaillard / Reuters
Twitter about met expectations set by investors for its growing user numbers, making slightly more money than expected.
Twitter said its total monthly active users were 284 million, up from 271 million in the second quarter this year. Without a major event like the World Cup, Twitter wasn't able to continue dramatically its user base, showing that it needs flagship events like that to juice its user numbers. Even though the company has been touting user activity around events like NFL games, it hasn't quite hit the highs that it achieved during the World Cup over the summer.
That, apparently, wasn't enough for Wall Street, even though it brought in more revenue than what Wall Street was seeking. After reporting its earnings, Twitter's stock fell about 9%. Analysts were expecting the company's user numbers would hit 284 million monthly active users. Twitter said it brought in earnings of 1 cent per share, on $361 million in revenue. Analysts overall were expecting earnings of 1 cent per share on $351 million in revenue.
That metric is important for the company, which has to prove to investors that it can continue to grow the company and, in turn, grow its advertising revenue. Last quarter, Twitter's user growth rate actually improved on a quarter-over-quarter basis, stemming a long string dating back to 2012 of declining user growth rate. The company 16 million users between the first and second quarter, and tktk users between the second and third quarter.
The last quarter was helped with a large number of people Tweeting about the World Cup. At the time, CEO Dick Costolo said on the earnings call today that the company had 2 billion additional Tweet impressions from across the Web during the World Cup. But that the company has seemed to hold of its decline is a good sign for Wall Street.
"Recall, second-quarter user metrics were much stronger than expected (user growth of 16 million quarter-over-quarter versus estimates in the 10 million to 12 million range) and the subsequent debate has been whether this metric was boosted primarily by the FIFA World Cup or the impact of the product changes," Sterne Agee analyst Arvind Bhatia wrote in a note.
Twitter accounted for 0.5% of global digital ad revenues in 2013, according to eMarketer, and is expected to increase to 0.8% this year. By comparison, Facebook is expected to increase its share of the worldwide digital ad market from 5.8% in 2013 to 8% this year, according to eMarketer.
Twitter's advertising growth may soon actually transcend its user base. Last week, at the company's first developer conference, Twitter rolled out a suite of tools that would allow developers to let users sign in with their Twitter accounts and run ads powered by its mobile ad network, MoPub. That's a big change for Twitter, which has historically not been very receptive to developers and instead shifted its narrative of the Twitter "platform" to mean embedding content from Twitter on other parts of the Internet.
Those tools may increase the company's overall footprint of its advertisements if developers choose to begin using them. If its new developer tools, like one that enables users to log in with just a phone number, become popular it can increases Twitter's overall footprint among applications, and by extension the distribution of its advertising network.
While the stock is off from its highs after its mobile active user growth was lower than expected, Twitter's share price has found some stable footing through much of the quarter, hovering around $50. Should Twitter be able to continue growing its user base and rolling out new advertising tools, as well as expanding that advertising network, it can continue to grow its business — and in theory that should make investors a little more willing to return Twitter to its initial valuation shortly after it went public.
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