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Twitter slumps on higher costs and lower use

February 6, 2014

twitterTwitter stockholders got the jitters as some fear it may be have topped out its phenomenal growth.

The drop came after the social network posted its first earnings report since going public in November. It said its monthly active users totaled 241 million in the fourth quarter, up 30 per cent from 185 million a year earlier and slower than 39 per cent seen in the prior period. Usage also dipped, with 148 billion views of Twitter timelines compared with 159 billion views in the third quarter.

Chief Executive Officer Dick Costolo said that he is focused on reversing the trend, but Twitter’s stock fell as low as $50 in New York up to 24 per cent off. The shares had more than doubled since debuting on the stock market in November.

The plunge reflects concerns that Twitter’s easy growth phase is ending. As recently as a year ago, Twitter, which began in 2006, was adding new users at rates of more than 60 per cent a year and timeline views were soaring.

Costolo said that the company has a plan to increase the number of users and engagement, primarily by making the site easier to use.

For the fourth quarter, Twitter reported revenue of $242.7 million, up from $112.2 million a year earlier.

Net loss widened to $511.5 million from $8.7 million a year earlier, and was more than double analysts’ projections of $253.5 million. The loss was driven by a $521 million stock-based compensation expense. Total spending also soared to $752 million, up more than six times from $121 million a year earlier.

Over the quarter, the number of timeline views may have decreased because Twitter has been working to make each one more valuable, with more people sharing and clicking to “favorite” each others’ messages, Costolo said on the call.

Categories: Articles, Business, Results, Social Media