Twitter Stock Tanks on Revenue Miss, Weak Guidance | Re/code
Wall Street briefly halted trading for Twitter stock Tuesday afternoon after the company’s Q1 earnings were leaked early.
Twitter missed analyst’s revenue projections, and the market reacted as Twitter stock quickly dipped almost 6 percent before trading was halted. Trading then resumed, and the stock finished the day down more than 18 percent.
Twitter reported $436 million in revenue for the quarter; analysts projected $457 million. Twitter did beat EPS estimates, reporting profits of 7 cents per share. Analyst estimates were 4 cents per share.
The stock also dipped due to lower-than-expected guidance from Twitter on both Q2 and full-year revenue projections. The company is projecting $470 million to $485 million in revenue next quarter and $2.17 billion to $2.27 billion on the year; analysts were looking for roughly $538 million and $2.37 billion respectively.
It was a revenue miss for Twitter, and this is how CFO Anthony Noto explained it on the earnings call: the company used to charge advertisers for any kind of ad engagement, including favorites and retweets. Over the past two quarters, Twitter has transitioned to a new pricing model, only charging advertisers for clicks that they want — like an app install or a website visit.
Because of that, Twitter is charging advertisers for fewer clicks and bringing in less money. The hope long term is that advertisers will find these ads to be more valuable (they’re no longer paying for “engagement” metrics) and spend more money with the company. That obviously hasn’t happened as quickly as Twitter had hoped.
The earnings leak was first reported by Selerity, a data science company in the business of finding and reporting company earnings early. Selerity works to automatically identify the URL of a company’s earnings statement before that URL is shared publicly — essentially pulling back the veil on earnings information before the company is ready to do so.
It’s why Selerity tweeted that the data simply came from the company’s investor relations page. It was probably on the site, but the page hadn’t been publicly shared. Companies have done this in the past, and stock traders and financial journalists will sometimes try to get the information ahead of everyone else.
What actually happened in this case was that Shareholder.com, a Nasdaq-owned web service that hosts Twitter’s investor relations page, posted the earnings at 12:07 p.m. PT, almost an hour early.
“Shareholder.com made publicly accessible an early version of Twitter’s earnings release,” Joe Christinat, a Nasdaq spokesperson told Re/code. “It didn’t impact other Shareholder.com clients and we’re investigating the root cause.”
So the leak wasn’t Twitter’s fault.
One silver lining for Twitter was that user growth came in as expected. The company reported 302 million active users, up 14 million over last quarter and aligning with analyst estimates. That’s 18 percent year-over-year growth.
Last quarter, Twitter added just four million new users, the lowest quarter-over-quarter jump since going public in late 2013. CEO Dick Costolo responded to the less-than-stellar growth by telling analysts the company would rebound in Q1 to the level Twitter grew throughout most of 2014, which was roughly 14 million new users per quarter.
Twitter met that projection.
The company also announced that it has acquired TellApart, a marketing company that specializes in cross-device targeting. That means tracking you from your phone to your tablet to your desktop to show you better targeted ads.
A company spokesperson declined to share deal terms.
Twitter also announced a partnership with Google’s DoubleClick to help its advertisers better measure the performance of their ads. For example, did showing you that ad actually lead to a purchase? It’s the second significant partnership between Twitter and Google in the past three months.
Kurt Wagner April 28, 20152:00 pm
Well, that was interesting. Here we are waiting for Twitter’s earnings call, and it’s been a hectic hour+ since the company’s earnings were first unveiled.
Kurt Wagner April 28, 20152:03 pm
If you haven’t read the story above, here’s a quick recap: The earnings leaked early, investors panicked when Twitter’s revenue and guidance fell short of expectations, and the stock tanked. Wall Street halted trading for a bit, and then the stock dipped 18 percent.
Kurt Wagner April 28, 20152:05 pm
On the call, the phone operator read a statement that sounded like Twitter is blaming Nasdaq, which apparently hosts the company’s investor relations site, for the leak. “We are continuing to investigate with them exactly what occurred.”
Kurt Wagner April 28, 20152:05 pm
We’ll update if we hear more about that later, but for now, on to the numbers. CEO Dick Costolo is sharing these now, which you can read about above.
Kurt Wagner April 28, 20152:07 pm
Dick is now talking about strengthening Twitter’s core user base, which are those 302 million MAUs (a.k.a. the people who actually have accounts).
Kurt Wagner April 28, 20152:08 pm
Twitter has tried to improve this experience lately by giving people things like a personalized “instant timeline” that helps them so they don’t have to find and follow as many people. Also talking about its new Highlights feature, which provides a summary of tweets from people you follow.
Kurt Wagner April 28, 20152:09 pm
The mission here is to make it easier for users to find content. A lot of people get overwhelmed trying to find people to follow. It can be a lot of work, IMO.
Kurt Wagner April 28, 20152:10 pm love to sign up.” webReader=”34″>
Dick says more than 500 million people visit Twitter each month but don’t log in. This isn’t a new stat, but worth noting. That’s a lot of people the company would love to sign up.
Kurt Wagner April 28, 20152:12 pm
Now Dick is talking about Periscope, the company’s new livestreaming app. Had one million new signups in the first 10 days. Talks about how it helps connect people. “It takes that connection to an entirely new level … by transporting people into each other’s lives.”
Kurt Wagner April 28, 20152:14 pm
Dick mentions pace of product releases. He’s pleased. This has been an issue in the past, but 2015 has been different. Lots and lots of product changes already this year.
Kurt Wagner April 28, 20152:15 pm
Now on to CFO Anthony Noto for the financials. You can read about them above; I won’t try to type them out.
Kurt Wagner April 28, 20152:17 pm
I believe Noto just said revenue was down due to advertisers’ reluctance to pay for ads in the auctions. Also fewer click-throughs than expected.
Kurt Wagner April 28, 20152:17 pm
Now on to CFO Anthony Noto for the financials. You can read about them above, I won’t try and type them out.
Kurt Wagner April 28, 20152:18 pm
He says Twitter needs to improve its product for “direct response advertisers” and touches on TellApart acquisition but only briefly. That was announced today (but likely missed by many given the leak).
Kurt Wagner April 28, 20152:19 pm
Regarding the click-throughs mentioned below, I am sure they’ll get more questions about that when they open the line for analysts. I missed why the numbers were lower than expected. This is why you don’t tweet while live blogging…
Kurt Wagner April 28, 20152:20 pm
Twitter reached 302 million users this quarter — this is the first time Twitter has been over 300M. This is also right around the growth everyone was expecting for this quarter.
Kurt Wagner April 28, 20152:21 pm
In other words — this is a silver lining for Twitter considering all that’s happened today!
Kurt Wagner April 28, 20152:23 pm
Noto is now going over guidance, which is lower than expected for Q2. I think this is a major reason the stock tanked.
Kurt Wagner April 28, 20152:23 pm
Although it’s now up 3.5% in after-hours trading.
Kurt Wagner April 28, 20152:23 pm
On to the analyst questions…
Kurt Wagner April 28, 20152:26 pm
Noto answers question about the click-through rates. He says it wasn’t an issue of supply, it was an issue of demand. Twitter changed its ad structure recently so that it’s charging marketers for fewer click types. For example, it’s no longer charging for favorites and retweets. So the click-through rates are lower.
Kurt Wagner April 28, 20152:27 pm
This is the longest single answer I’ve ever heard from Noto. He touched on many things, including how TellApart will help them drive more targeted ads. Sorry I couldn’t get to it all.
Kurt Wagner April 28, 20152:29 pm
Q: How are you doing in bringing on new advertisers? Any overlap with the TellApart clients? Also, are there any user metrics for Periscope?
Kurt Wagner April 28, 20152:31 pm
Noto says there is very little overlap in TellApart’s customer list and Twitter’s advertiser list.
Costolo says that he has nothing to share on Periscope (not surprising here). Touches on protests going on in Baltimore and how Periscope is a great way to get a look in on what’s happening in scenarios like that.
Kurt Wagner April 28, 20152:32 pm
Q: How’d you get growth back on track? What’s the outlook for Q2?
Kurt Wagner April 28, 20152:33 pm
Noto: “We’re off to a slow start in April.” Can’t predict where they’ll be next quarter. This is likely not the answer people were looking for…
Kurt Wagner April 28, 20152:36 pm
Dick now talking about Google DoubleClick deal — it will roll out in May.
Also, surprisingly, Costolo says there’s a partnership with Apple as well to surface content within iOS searches. Not exactly sure if that’s tweets or what, but that’s not something I’ve heard before.
Kurt Wagner April 28, 20152:37 pm
Q: Do users who join Twitter because of events like World Cup or Super Bowl hang around longer or shorter than “regular” users?
Kurt Wagner April 28, 20152:38 pm
Noto: These users are about the same as regular users. There is more engagement around these events, but no indication they bail any earlier.
Kurt Wagner April 28, 20152:39 pm
Q: Can you share info on the DoubleClick deal? How are those deals going where you show ads on platforms that aren’t Twitter, like Flipboard and Yahoo Japan?
Kurt Wagner April 28, 20152:39 pm
Noto: Nothing on Google. Flipboard ads launched this quarter, but no hard numbers.
Kurt Wagner April 28, 20152:41 pmfrom Twitter (very meta). I wonder how they are selected? This one was about how Twitter hires and retains talent, which was a bit of a softball.” webReader=”35″>
Just an interesting observation: Twitter takes questions from Twitter (very meta). I wonder how they are selected? This one was about how Twitter hires and retains talent, which was a bit of a softball.
Kurt Wagner April 28, 20152:42 pm
Q: Can you talk more about video? What’s the deal there? Twitter launched native video in January and we all LOVE VIDEO!!!
Kurt Wagner April 28, 20152:43 pm
Costolo: Since launching native mobile video, Twitter has seen “orders of magnitude increases” in volume of videos shared to Twitter. I have little idea what that means, but I imagine Dick is trying to say that Twitter users also LOVE VIDEO!!!
Kurt Wagner April 28, 20152:45 pmWe don’t have a supply issue today when it comes to ads. Our business is dependent on the audience we can build (MAUs, logged out, etc). ” webReader=”36″>
Noto is talking again about clickthrough rates on the ads. Clearly a lot of interest in why revenue was lower than expected. He reiterates: We don’t have a supply issue today when it comes to ads. Our business is dependent on the audience we can build (MAUs, logged out, etc).
Kurt Wagner April 28, 20152:46 pm
So Twitter’s business is going to grow (or shrink) depending on how it can build the user base. SURPRISE!
Kurt Wagner April 28, 20152:47 pm
Noto says Twitter has “tens of thousands” of advertisers. For comparison, Facebook has two million advertisers.
Kurt Wagner April 28, 20152:48 pm
Q: Can you give us more details about Google deal?
Noto: No.
Does add that they are talking with other third-party attribution platforms. Companies that can help advertisers determine if their ads lead to actual sales.
Kurt Wagner April 28, 20152:50 pm
I missed another question because of #Twitter. But Costolo is talking about direct messaging, and says he wants to keep helping people “move fluidly between the public and private conversation.” So sounds like there are more messaging updates on the horizon.
Kurt Wagner April 28, 20152:51 pm
Q: Can you grow Twitter’s user base in a way other than creating more products? Maybe some marketing, perhaps?
Kurt Wagner April 28, 20152:52 pm
Dick: A lot will come down to the products, especially the new products they’ve made to lure new users. We should be proactively bringing people into those experiences, though.
So a little of both I guess.
Kurt Wagner April 28, 20152:52 pm
Q: You recently started selling tickets on Twitter – What’s next?
Kurt Wagner April 28, 20152:53 pm
Dick: We’re focused on “in-the-moment” commerce but nothing to share on what’s coming next.
Kurt Wagner April 28, 20152:53 pm
Q: You retired the timeline views metric (this is the first quarter Twitter hasn’t used it), so what should we be using to measure engagement?
Kurt Wagner April 28, 20152:55 pm
Noto: There’s no single metric for engagement. Daily Active Users is one metric Twitter looks at. Tweets per day. Direct Messages. Favorites and Retweets. All of these are things Twitter looks at (they don’t share with us though). “Not one be all, end all metric.”
Kurt Wagner April 28, 20152:56 pmwrote something on this metric issue a few months back.” webReader=”19.0235294118″>
In case you are interested, I wrote something on this metric issue a few months back.
Kurt Wagner April 28, 20152:57 pm
Q: Will Periscope users be added to MAU total?
Kurt Wagner April 28, 20152:58 pm
I don’t think they answered the Q… analysts often ask multiple Qs and this one got ignored. Boo.
Kurt Wagner April 28, 20153:03 pm
And that’s a wrap. The call is now over.
Kurt Wagner April 28, 20153:03 pmA few takeaways: Partnerships with Google and Apple, a TellApart acquisition, lower-than-expected guidance and revenue projections, and less-than-ideal growth so far in April. Woof. ” webReader=”36″>
A few takeaways: Partnerships with Google and Apple, a TellApart acquisition, lower-than-expected guidance and revenue projections, and less-than-ideal growth so far in April.
Woof.
Kurt Wagner April 28, 20153:05 pm
The stock is down about 2 percent now that the call is over. I think the small gain was erased with Noto’s user growth comments.
Kurt Wagner April 28, 20153:06 pm
Will be interesting to see how this whole Twitter/Nasdaq thing works out too… shade has been thrown, we’ll see what the response is. Thanks, as always, for joining!
Kurt Wagner April 28, 20153:11 pm
Now Dick is talking about Periscope, the company’s new live streaming app. It had one million new signups in the first 10 days. Dick talked about how it helps connect people. “It takes that connection to an entirely new level… by transporting people into each other’s lives.”
Kurt Wagner April 28, 20153:12 pm
He says Twitter needs to improve its product for “direct response advertisers” and touches on TellApart acquisition but only briefly. That was announced today (but likely missed by many given the leak. Did we mention there was a leak???)
Kurt Wagner April 28, 20153:14 pm
Q: Any overlap with the TellApart clients? Also, are there any user metrics for Periscope?
Kurt Wagner April 28, 20153:18 pm
It will be interesting to see how this whole Twitter/Nasdaq thing works out, too… shade has been thrown, we’ll see what the response is. Thanks, as always, for joining!
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Twitter Stock Tanks on Revenue Miss, Weak Guidance | Re/code
