Twitter added about 5 million monthly active users in the first quarter — reversing its decline from the prior quarter — but the social media company’s stock took a hit after it posted revenue below expectations.
Total monthly active users averaged 310 million for the quarter, up 3% year over year. The increase comes after Twitter’s active monthly user base dropped by about 2 million in the fourth quarter of 2015.
Twitter reported $594.5 million in revenue, up 36% from a year earlier, and adjusted earnings per share of 15 cents. Wall Street had expected the social service to report $608 million in revenue and adjusted EPS of 10 cents per share.
Twitter shares fell more than 14% in after-hours trading Tuesday. The company forecast second-quarter revenue of between $590 million to $610 million — considerably short of analyst estimates of $678 million.
“What was most troubling to us was management’s lack of urgency,” analyst Michael Nathanson wrote in a research note. “Twitter’s revenue growth is free-falling while the company highlights its ability to beat on the bottom line.” He noted that Facebook is growing sales at a 50% yearly clip on a revenue base nine times the size of Twitter’s.
Growth in MAUs the first quarter was “driven by both seasonality and marketing initiatives,” Twitter said in an investor letter. It touted its reach beyond logged-in users, claiming Twitter has more than 800 million visitors overall and more than 1 billion monthly unique visitors on pages that syndicate tweets. The MAU tally currently excludes SMS “fast followers” but the company said it will continue to “employ strategies to grow and monetize SMS Fast Followers” and will include them in the total audience count in the future.
Twitter is increasingly focusing on live video — and growing video advertising — after acquiring live-streaming startup Periscope last year. Facebook also is charging ahead to expand live-streaming on its service.
This month Twitter secured a deal with the NFL to live-stream 10 Thursday night games in the fall, and the company said it has signed an unnamed Fortune 50 advertiser for the live streams. Under the deal, Twitter will be able to sell about 30% of the ad inventory in the “Thursday Night Football” live broadcasts with the rest sold by CBS and NBC.
Following the announcement of the NFL pact, “almost every league in the world contacted us” to discuss ways of working with Twitter, CEO Jack Dorsey said on the earnings call Tuesday.
In addition to the live NFL games — to be available to users worldwide for free across smartphones, tablets, PCs and connected TVs — Twitter will distribute in-game highlights from “Thursday Night Football” as well as live broadcasts on Periscope from players and teams before, during and after the matches. “You should expect to see us working with other partners to bring these kinds of joint experiences to life on Twitter,” the company said in its Q1 letter.
Periscope users have created over 200 million broadcasts to date, and watch more than 110 years of live video every day on iOS and Android apps, according to Twitter. The company also called out the recent partnership with GoPro to enable its cameras to broadcast directly on Periscope.
In February, Twitter launched a new timeline option surfacing the “best tweets,” and the company said it’s seen a lift in tweets, retweets, replies and likes among those who use the feature. Twitter said the opt-out rate for the enhanced timeline is about 2%.
Twitter’s ad revenue for the first quarter totaled $531 million, up 37% year-over-year, while data licensing and other revenue climbed 34%, to $64 million, in the period.
Revenue from video ads on Twitter’s owned-and-operated sites nearly tripled year-over-year in Q1. Twitter said it is developing a set of additional features for video advertisers, including more detailed demographic targeting and verification, and tools for reach and frequency planning and purchasing. Those are set to launch in the fall with the NFL’s “Thursday Night Football” games.
“We believe we can tap into video (advertising) budgets once those features are in place,” Twitter COO Adam Bain said, whereas the company’s ad revenue typically comes from spending pegged to social media. The company now has 300 partners for Twitter Amplify, its sponsored video tweet program.
Twitter had about 3,800 employees at the end of Q1, compared with 3,898 at the end of 2015.