Twitter Results Cast Doubt On Advertising Strategy

Marketing

Twitter’s ad growth was lower than expected, although it expects ‘direct response’ adverts to become more lucrative

Twitter’s share price tumbled late on Tuesday after disappointing first-quarter financial results were published early over the company’s own social media platform.

Selerity, a financial services start-up, published key figures in a series of Twitter messages on Tuesday afternoon, after an automated software tool followed a link to where Twitter had accidentally released the data earlier than planned.

The company had intended to announce its quarterly earnings after the close of markets on Tuesday.

Revenue growth slows

twitter-logo-solid1The results, representing the weakest quarterly revenue growth since Twitter became a publicly traded company, raised doubts over the company’s advertising strategy.

“Today’s $TWTR earnings release was sourced from Twitter’s Investor Relations website,” Selerity wrote. “No leak. No hack.”

Twitter shares closed about 18 percent down, as investors responded to the fact that it had earned $436 million (£284m) in revenues, significantly less than the $456.5m it had expected, and also lower than analysts had predicted.

Revenues grew 74 percent over the previous quarter, but Twitter’s ad revenues had previously doubled each quarter over the past year.

Twitter has never made a profit, but has focused on the development of new advertising techniques in the expectation that ad revenues will ultimately prove lucrative. However, it said new ads resembling Twitter messages, called “direct response ads”, did not perform as well as expected, the company said. Similar ads have proven successful on rival platforms such as Facebook.

Growth strategy

Meanwhile, the costs related to continued expansion, including added staff, offices and data centres, helped expand Twitter’s losses to $162 million, 23 percent up from the same quarter a year ago.

“Since our inception, we have incurred significant operating losses, and, as of 31 December , 2014, we had an accumulated deficit of $1.57 billion,” the company said in last month’s annual report.

In the report, the company said it expects ad revenues to grow more slowly in future, in part due to a “gradual decline” in the growth rate of its user base.

Twitter added 14 million users in the last three months of 2014 to a total of 30 million.

In a statement, Twitter chief executive Dick Costolo said it believes direct-response ads will become more lucrative as the platform sees further development.

“It is still early days for these products,” he stated.

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