* Shares plummet 18 pct after disappointing user, views
* Hopes had run high for blowout numbers
* $243 mln in revenue in first results as public company
* CEO asks for time to show reaccelerating user figures
(Adds chief executive comments, updates share price)
By Gerry Shih
SAN FRANCISCO, Feb 5 Twitter Inc on
Wednesday reported its slowest pace of user growth in recent
company history, dimming hopes that the social media phenomenon
can sustain its torrid pace of expansion and wiping out nearly a
fifth of the company's value in after-hours trading.
The San Francisco company posted better-than-expected
fourth-quarter revenue of $243 million in its first results as a
public company. But investors focused on the anemic user growth,
as well as a severe decline in timeline views, a measure of user
Twitter, which held a highly anticipated initial public
offering in November at $26 a share, has divided investor
opinion in recent months, as shares raced to more than $66 ahead
of Wednesday's results despite an absence of news.
Twitter's valuation has been predicated in part on the
belief it could expand its mainstream appeal and eventually
become as ubiquitous as Facebook Inc, which has five
times as many users. Some analysts warned that its valuation
looked increasingly bloated.
User growth, a closely watched metric, in fact sputtered.
Twitter averaged 241 million monthly users in the December
quarter, up just 3.8 percent from the previous three months -
the lowest rate of quarter-on-quarter growth since Twitter began
disclosing user figures.
"What this report will do is it will question how mainstream
is Twitter as a platform," said Arvind Bhatia, an analyst at
Sterne, Agee & Leach. "Both in the U.S. and internationally, the
monthly active user base did not grow as fast as people thought,
and that has an impact on the number of timeline views."
Shares fell sharply after hours on Wednesday to $54, down
about 18 percent from a close of $65.97 on the New York Stock
The tumble came as a rude jolt for investors who had bid up
Twitter shares to about 30 times projected 2014 sales, based on
its Wednesday closing price - or more than twice as expensive as
Facebook or LinkedIn Corp.
Twitter's user numbers grew at 10 percent, 7 percent, and 6
percent during the first three quarters of the year,
respectively, before coming in at 3.8 percent for the final
Perhaps most surprisingly, timeline views dropped sharply
from 159 billion to 148 billion in the quarter, signaling that
users were refreshing their Twitter accounts less often.
Dick Costolo, the Twitter chief executive officer roundly
celebrated just three months ago on Wall Street for pulling off
a glitch-free IPO, found himself on Wednesday facing repeated
questions from analysts about when Twitter's user growth might
Twitter made a number of changes to its layout during the
recent quarter to help new users make sense of Twitter and stick
with it, he said. For instance, Twitter now shows multimedia
directly inside a tweet card and chains together conversation
threads, which have boosted user engagement.
Costolo also talked up other initiatives such as improving
the onboarding process for newcomers to Twitter's mobile app,
saying he had "every confidence" that the slope of its user
growth trajectory will change in 2014 once those changes take
But, he added, "what that slope will look like or when it
will occur is not something I can guess at."
In a rare move for fast-growing Internet companies, Twitter
offered forward-looking guidance, saying it was targeting
revenue of $230 million to $240 million in the first quarter.
Even as Twitter's user numbers appeared to plateau, one
bright spot was that the efficacy of its advertising business
model - which places ads inside users' timelines every time they
refresh - appeared to steadily improve. The company said it made
$1.49 per 1,000 timeline views, a significant jump of 76 percent
from a year prior.
In the past year, Twitter has invested heavily in improving
its targeting capabilities to show ads that elicit more feedback
from users; advertisers have proven willing to pay more for
Twitter had a net loss of $511.5 million in the fourth
quarter, widening significantly from a year earlier as it
shelled out on its sales force, research and marketing.
On a non-GAAP basis that excluded items, it made a profit of
2 cents per share, versus roughly break-even a year ago, beating
expectations for a slight loss.
"The actual numbers are strong in terms of fundamentals,"
said Ben Schachter, an analyst at Macquarie. "People had really
run this thing up expecting an absolute blow-out. Guidance looks
strong, just not as strong as some people had hoped."
(Reporting by Gerry Shih and Alexei Oreskovic; Editing by Nick
Zieminski and Lisa Shumaker)