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Twitter blames weak sales on lackluster ads, drops forecast

Zach Miners | April 29, 2015
Sales grew by 74 percent, but below analysts' estimates.

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Twitter failed to meet revenue estimates for the first quarter, and is lowering its expectations for the rest of the year, due to weaker than expected performance of some of its ads products, the company said Tuesday.

Total sales for the period that ended March 31 were $436 million, Twitter reported, up 74 percent from the previous year. Analysts, however, were expecting sales of roughly $457 million, according to estimates compiled by Thomson Financial Network.

The company's stock plummeted by nearly 20 percent toward the end of trading on Tuesday, to around $42. Twitter typically publishes financial data after markets close, but they appeared online, apparently in error, during the trading session.

Twitter still has not managed to turn a profit since it went public in 2013. The company posted a net loss of more than $162 million for the quarter, down nearly 23 percent from the same period last year.

The poorly-performing advertising products were a new feature for small and medium-sized businesses to publish ads, and a new analytics home page for advertisers to track the success of their ads.

"It's still early days for these products, and we have a strong pipeline that we believe will drive increased value for direct response advertisers in the future," CEO Dick Costolo said in a statement.

Twitter expects it revenue for the full year to be between $2.17 billion and $2.27 billion, lower than the $2.3 billion to $2.35 billion it had been predicting for 2015.

To boost its advertising business, Twitter announced alongside its results that it had entered into an agreement to acquire TellApart, a marketing technology company that lets retailers and e-commerce advertisers target potential customers across devices. The technology could dovetail nicely with Twitter's growing efforts to let users buy retail items while on Twitter's site.

Twitter also announced a partnership with Google's DoubleClick advertising platform, which Twitter said will help marketers measure their ad performance, and manage their Twitter ads through the platform.

On an adjusted basis, which excludes certain expenses, Twitter's net earnings for the first quarter was $0.07 a share, beating analyst estimates of $0.04 a share.

Twitter was more on target with its user count. The company ended the quarter with 302 million users who log in monthly, up 18 percent from the same period last year. That's a gain of 14 million users from the previous quarter, and in line with the company's own estimates.

Still, Twitter's ability to attract and keep new users is a big challenge. Without strong user growth, its crucial advertising business is weakened, and its ability to compete against Facebook, Google and younger players like Snapchat is hampered. At 302 million users, Twitter is less than a quarter of the size of Facebook.

 

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