Twitter Stock Jumps on Soaring Revenue, but Growth Remains a Concern
SAN FRANCISCO - Twitter reported a jolt of growth in the second quarter, driven in part by heavy use of the service during the World Cup soccer tournament. The strong results surprised Wall Street, and prompted investors to send the company's shares up 30 percent in after-hours trading.
Revenue soared 124 percent, and the average number of people using the microblogging service in June was up 6 percent from March.
However, Twitter faced continuing problems getting people to return to the service, with the average user refreshing his or her Twitter feed 792 times a month on average during the quarter, less than the first quarter and last year's second quarter.
Still, Twitter has demonstrated an ability to extract more advertising revenue from each user, and it is adding new products that also allow it to sell ads in other companies' mobile applications.
For the quarter that ended June 30, the company reported revenue of $312 million, up from $139 million a year ago. Analysts had expected the company to post revenue of $283 million.
Twitter reported a net loss of $145 million, or 24 cents a share, compared to a loss of $42 million, or 32 cents a share, a year ago.
Excluding certain stock-based compensation and acquisition costs, the company had a profit of $15 million, or 2 cents a share, compared with a net loss of $16 million, or 12 cents a share, a year ago. On that adjusted basis, analysts had expected the company to report a loss of 1 cent a share.
'Our strong financial and operating results for the second quarter show the continued momentum of our business,' Dick Costolo, Twitter's chief executive, said in a statement. 'We remain focused on driving increased user growth and engagement, and by developing new product experiences, like the one we built around the World Cup, we believe we can extend Twitter's appeal to an even broader audience.'
Twitter said its users made 672 million tweets during the entire monthlong World Cup - more than any other event in its history.
Ever since it first sold stock to the public last November, Twitter has been struggling to find ways to make its service more compelling. The average number of users in a given month, a key figure used by Wall Street to measure all social networks, has grown by single-digit percentages from quarter to quarter since Twitter first sold stock to the public in its initial public offering last November.
In June, Twitter said, it had 271 million monthly average users, up from 255 million in March.
Equally troubling for the company's long-term prospects is that existing users seem to be spending less time on the service.
In June, Americans spent an average of 7.2 minutes a day on Twitter's mobile apps, down from 9.2 minutes a year ago, according to comScore data analyzed by the brokerage firm Cowen & Company.
That 22 percent drop was the worst showing of any major social app. Pinterest, a visually oriented social network, saw its mobile usage double during that time, and Facebook, the largest and most mature social network, squeezed out a 3.3 percent gain.
Twitter executives have argued that such figures understate the service's true reach, since many of its messages, known as tweets, are embedded on other websites and apps and appear in mass media outlets like television.
Indeed, the company may highlight other measures of growth during a conference call with investors to discuss its results late Tuesday afternoon.
Mr. Costolo acknowledged the company's usage problems in February, but since then, he has offered few clues about his strategy for improving engagement and persuading newcomers to stick around.
Mr. Costolo has publicly signaled his dissatisfaction with Twitter's progress, however, by pushing out several key executives this year, including Ali Rowghani, the chief operating officer; Christoper Fry, the senior vice president for engineering; and Michael Sippey, the head of product.
A few weeks ago, he also brought in a new chief financial officer, the former Goldman Sachs investment banker Anthony Noto, to help persuade investors that the company has a bright future. Before the results were released, Twitter's stock ended the day at $38.59, well below its close on its first day of trading on Nov. 7 and half of the all-time high reached in December.
In after-hours trading, however, shares topped $50.
Whatever Twitter's challenges in drawing in users, its advertising platform is attracting a lot of interest from advertisers, according to James Borow, chief executive of Shift, a company that helps advertisers like Marriott and Toyota conducts social marketing campaigns.
'They are defining a tweet as a self-contained bit of media and they are distributing that all over the Internet,' Mr. Borow said. 'Twitter sees its value as truly native advertising, in-stream advertising, anywhere.'