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Twitter’s Shopping Bag Grows

Posted on Thursday, Aug 7th 2014

According to eMarketer, social networking company Twitter’s (NYSE: TWTR) growth in the US is beginning to slow down. During the current year, Twitter’s user base is estimated to grow a modest 11.6%  in the US. Compare that to growth anticipated in the other regions. eMarketer estimates that Asia Pacific will see a growth of 33% over the year and will account for nearly a third of Twitter’s user base by the end of the current year. Slowing growth in the US, however, has not slowed down Twitter’s financial performance or their shopping spree.

Twitter’s Financials
For the recently reported second quarter, Twitter’s revenues grew 124% over the year to $312 million. They ended the quarter with an EPS of $0.02. Their performance was significantly ahead of the market’s projections of revenues of $283 million with an anticipated loss of a penny a share.

Twitter’s advertising upgrades have paid up. During the quarter, advertising revenues continued to drive growth as they surged 129% over the year and 22% over the quarter to $277 million. The analysts were looking for advertising revenues of $260 million for the quarter. Mobile advertising revenues were 81% of total advertising revenue compared with 67% contribution a year ago. Data licensing and other revenues improved 90% to $35 million. International markets accounted for 33% of Twitter’s revenues.

Twitter ended the quarter with user base growing 24% over the year and 6% over the quarter to 271 million. Non-US regions accounted for 211 million overall monthly active users. Overall, Twitter users tweeted 500 million Tweets daily. Revenue per timeline also reported a strong increase as they saw the metric in the US grow from $3.47 per 1,000 timeline views a quarter ago to $3.87 per 1,000 timeline views. International revenue per 1,000 timeline increased from $0.61 a quarter ago to $0.75. Analysts believe that the recent FIFA World Cup helped Twitter in delivering an impressive performance.

For the current quarter, Twitter projected revenues of $330 million-$340 million with an EBITDA of $40 million-$45 million. The market was looking for revenues of $323.7 million. They raised their full year revenue forecast to $1.31 billion-$1.33 billion, ahead of the Street’s projections of $1.27 billion.

Twitter’s Acquisitions
During the recent quarter, Twitter has been focused on inorganic growth. Last month, they announced the acquisition of security password firm Mitro for an undisclosed sum. New York-based Mitro’s password manager tool works on Web browsers and mobile devices and lets people share accounts. The open sourced password manager synchronizes passwords across devices and lets users share them across teams and organizations. Twitter plans to leverage Mitro team’s talent to focus on geolocation projects so that they are able to deliver improved local advertising solutions.

Last week, they announced the acquisition of image search startup firm Madbits. New York-based Madbits focuses on helping with image search and in the creation of image sets that organize large databases of images. Their product Momentsia lets users create collages using photos from the iOS app. Terms of the deal were not disclosed. It is expected that Twitter will use Madbits’ capabilities to enhance their image features.

As part of their advertising enhancements, they acquired New York-based TapCommerce for an estimated $100 million and Namo Media for an estimated $50 million. TapCommerce focuses on attracting customers back to an app after they have downloaded it. During the quarter, Twitter had released mobile-app install ads that let advertisers place ads for downloadable apps directly in a reader’s news feed. Namo Media integrates native ad content with the site where the ads are being viewed. They are particularly focused on mobile ads. The acquisitions will help strengthen their advertising revenues.

Twitter’s eCommerce Focus

Market reports suggest that Twitter may be looking to enter the e-commerce space. Recently, Android-based Twitter users found a button on their settings, currently inactive, that enables Payment and Shipping. Twitter hasn’t expressed their views on getting into e-commerce. They have experimented with granting access to a Buy button for advertised tweets. But this time it may be bigger. To help with e-commerce related features, they recently acquired CardSpring. CardSpring is an application platform that lets developers build offers such as electronic coupons that are linked to loyalty cards and virtual currencies. These offers work with the user’s credit cards and other payment types.

Twitter’s stock is trading at $43.83 with a market capitalization of $26.1 billion. It touched a 52-week high of $74.73 in December 2013.

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