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Twitter Explores New Enterprise Offerings

Posted on Friday, Apr 29th 2016

Disappointing results for the tech sector continued with the announcement of Twitter’s (NYSE: TWTR) quarterly performance. The company continues to struggle to attract a higher user base and is failing to meet market’s revenue expectations.

Twitter’s Financials

Twitter’s Q1 revenues grew 36% over the year to $595 million, falling short of the Street’s forecast of $608 million. EPS of $0.15 was ahead of the market’s projected earnings of $0.10 per share for the quarter.

By segment, Advertising revenues grew 37% to $531 million. On a constant currency basis, advertising revenues grew 39% over the year. Mobile advertising revenues accounted for 88% of total advertising revenue for the quarter. Data licensing and other revenues grew 34% to $64 million.

By region, revenues from the US grew 35% to $390 million and international revenues grew 39% to $204 million.

Among operating metrics, average monthly active users (MAUs) grew 3% over the year to 310 million. Twitter added 5 million users over the previous quarter. Mobile MAUs accounted for 83% of total MAUs. It was an impressive growth considering that the market was expecting 308 million MAUs. Despite the increase, this was the ninth straight quarter of decelerating user growth for Twitter. A year ago, they had reported 18% growth over the year.

For the current quarter, Twitter projected revenues of $590 million-$610 million, falling short of the Street’s projections of $677.57 million.

Twitter’s Growth Drivers

Earlier this year, Twitter had launched a new Timeline that relied on algorithms to determine what Tweets to show first to the user. While Twitter did not disclose clear metrics, it maintains that the service has driven higher user engagement. The new Timeline has reportedly led to higher number of tweets, retweets, replies, and likes. Even though users can opt out of the new Timeline, Twitter has seen a comparatively modest 2% opt out rate.

Now Twitter is also focusing on the enterprise segment. Earlier this year, they released two new features to help businesses doing customer service on Twitter. They released Direct Message (DMs) prompts in Tweets that make it easy for businesses to reply to a public Tweet and make the conversation a private, direct message to the consumer. They also released Customer Feedback Cards, a survey service that allows organizations to survey customers about their experience within a DM conversation. The two services work well together because businesses can address customer issues and also gain feedback on their performance through DMs. The service has been received well and giants like Apple are also using the service. I think these are two truly great ideas and hold immense promise from the monetization perspective.

Finally, Twitter continues to address the video streaming segment. Twitter’s Live Streaming Video through both Twitter and Periscope has integrated streaming video within the Twitter conversations. Users can now view and tweet on a single platform. They also expanded the content available for live streaming by extending their three-year relationship with the NFL to include free streaming of 10 Thursday Night Football games, pre-game analysis shows, post-game highlight shows, and behind-the-scenes Periscope broadcasts for the next season. But Live Streaming will face tougher competition in the days to come as Facebook continues to push its version of the offering to its gigantic user base. Twitter is still confident of outpacing Facebook’s attempts because its users are more focused on events. We have to see.

Twitter’s stock is trading at $14.64 with a market capitalization of $10.17 billion. It touched a52-week high of $39.74 in April last year and had fallen to a 52-week low of $13.91 in February this year. Shareholders are jittery.

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