For Twitter, World Cup Helps Boost Growth

By Vindu Goel, The New York Times | Updated: 1 August 2014 16:07 IST

The social networking company reported strong growth in the second quarter, driven in part by heavy use of the service by soccer fans around the world during the monthlong tournament, which spanned June and July.

Twitter's results far exceeded Wall Street's expectations, and the company's shares rose about 29 percent in after-hours trading.

"During the World Cup, we delivered the kind of events experience that I've wanted to see from us for some time," Dick Costolo, Twitter's chief executive, said in a conference call with analysts.

The service was tailored to each game and each country's fans, giving a more personalized experience than new users have typically encountered when signing up in the past.

Revenue soared 124 percent during the quarter and the average number of people using the microblogging service in its June quarter was up 6 percent from its March quarter.

(Also See: Fifa World Cup 2014 The Biggest Social Media Event Ever: Facebook)

However, Twitter reported a continued decline in how many people were using the service, as measured by timeline views, a measure the company invented.

Americans on average refreshed their Twitter feeds 792 times a month during the quarter, a drop from the first quarter and last year's second quarter. Globally, timeline views were down 7 percent from a year ago, but up 4 percent from the first quarter as the company made a huge push to recruit new international users during the World Cup.

Despite the flat usage of the service, Twitter has demonstrated a striking ability to extract more advertising revenue from each user. 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.

Mark Mahaney, an Internet analyst with RBC Capital Markets, said that, like Facebook, Twitter is just beginning to climb a steep revenue curve as advertisers discover its ability to reach mobile users.

"This can be a highly profitable business," he said. "They'll be able to dramatically increase their monetization just like Facebook did."

Twitter reported a net loss of $145 million, or 24 cents a share, compared with 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.

The World Cup illustrated Twitter's greatest strength and its biggest weakness: Like cable news networks its traffic is dependent on surges of public interest around real-time events. Twitter said its users sent more than 672 million tweets during the entire tournament - more than during any other event in its history.

But the company's chief financial officer, Anthony Noto, blamed the drop in usage by Americans during the quarter on the lack of galvanizing events like the Super Bowl that occurred in the first quarter.

"What you're seeing now is a World Cup bump," said Debra Aho Williamson, a principal analyst with the research firm eMarketer. "The proof will be what their numbers like next quarter, and the quarter after."

Ever since it first sold stock to the public last November, Twitter has been struggling to find ways to make its service more engaging, especially to newcomers.

(Also See: Brazil vs Germany Smashes Twitter Record)

The average number of users in a given month, a crucial figure used by Wall Street to measure social networks, has grown by single-digit percentages from quarter to quarter since Twitter's initial public offering last November.

As of June 30, Twitter said, it had 271 million monthly average users, up from 255 million as of March 31.

Twitter executives have argued that such figures understate the service's true reach, because many of its messages are embedded on other websites and apps and appear in mass media outlets like television.

In the conference call with investors, Costolo said that the size of Twitter's audience was two or three times its active user base, and the company is actively working on ways to more deeply engage those casual visitors.

A concern 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 & Co. That 22 percent drop was the worst showing of any major social app.

Costolo has publicly signaled his dissatisfaction with Twitter's progress by pushing out several 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.

Before the results were released, Twitter's stock closed at $38.59, half of the all-time high.

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 conduct social marketing campaigns.

"They are defining a tweet as a self-contained bit of media and they are distributing that all over the Internet," Borow said.

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