Twitter shareholders in a tizz as losses hit $645m

It was Twitter's first results announcement as a publicly listed company. Revenues are up, but so are losses - way up. And user numbers increased by just 9 million.

by Emma Haslett
Last Updated: 12 Jun 2015

In the run-up to Twitter’s November IPO, the company did everything in its power to avoid the same fate as Facebook. Lest we forget, during Facebook’s flotation in 2012, a combination of technical difficulties and rumours it was over-priced meant its shares lost half their value in the year after it IPOd.

So when Twitter floated, it a) chose a different stock exchange (NYSE as opposed to Nasdaq, which was blamed for Facebook’s technical problems) and b) was very careful about its pricing. As a result, shares in Twitter have risen by nearly 150% since its IPO.

And then it went and spoiled it all by doing something stupid like posting its first-ever quarterly report as a publically listed company - and suddenly, shares tumbled by 17%.

You can see why: after costs, fourth-quarter losses hit $511m (£313m), up from $8.7m during the same period last year. And while revenues rose 116% to $242.7m for the quarter (way above the $218m expected by analysts), investors’ eyes were clearly on the bottom line. Full-year revenue might have more than doubled to $664.9m - but losses increased eightfold, to $645m. And then, to compound things, chief executive Dick Costolo said it was the company’s ‘strongest quarter to date’. We’d hate to see what a weak quarter looks like…

To be fair, investors did expect a loss: Twitter has been pretty open in the past about the fact that it’s never turned a profit. And any recently-IPOd company will incur costs: in this instance, the losses were increased by $521m for a share-based compensation scheme, including $406m it couldn’t account for until it floated.

What spooked them, though, were its user figures: the company now has 241 million users, up a mere 9 million from its previous quarter. Only 1 million of those were in the US - ie. where the advertising bucks are.

Usage is also dropping: according to its figures, Twitter users viewed their timelines 148 billion times during the quarter, compared with 159 billion views during its third quarter - which suggests the social network’s fast growth phase is over. Given that much of its $34.7bn market cap is based on its ability to grow in the future, that means Costolo may have some tough questions to answer over the next few months.

In the company’s statement, though, Costolo said there were plans to ‘further build upon the Twitter experience’. On a call with analysts he added, rather confusingly, that ‘we have a plan to make a broader audience to get Twitter to understand more broadly’ (broadly speaking, what MT thinks he’s trying to convey is a sense of ‘broadness’ - in the broadest sense of the word).

‘We’ve seen success on preliminary steps on that,’ he added. ‘We believe the cumulative effect of changes we make over the course of the year… will result in changing the slope of the growth curve. We have every confidence that will happen. What exactly the slope of that growth curve will look like and when it will occur we cannot guess.’

So he’s a man with a plan. Sort of.

On the bright side, at least ad revenue was up: revenue per thousand timeline views reached (wait for it) $1.49 in the fourth quarter, 76 cents higher than the same time last year and ahead of expectations of $1.15. Still pretty paltry, though, isn’t it.

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