Twitter surprises with a sales gain, but user growth lags

Growth in users came largely from people who don't hold actual accounts

Twitter's headquarters on Market Street in San Francisco

Twitter's headquarters on Market Street in San Francisco

Twitter reported a higher than expected increase in revenue on Tuesday, suggesting progress in the company's efforts to grow its ad sales.

Total revenue for the second quarter ending June 30 was US$502 million, Twitter reported, up 61 percent from the same period last year, and beating estimates of $481 million from analysts polled by the Thomson Financial Network.

Twitter also reported decent growth in its users, although with a caveat. For the quarter, the total number of users logging in monthly was 316 million, up 15 percent. But compared to the first quarter, the vast majority of the increase was derived from SMS Fast Followers, people who access Twitter content on mobile devices but do not have accounts on the service.

Excluding SMS Fast Followers, Twitter grew its monthly active users by only two million on a quarterly basis.

Investors have been concerned by Twitter's user growth and the strength of its advertising business since it went public in 2013. Twitter still has not managed to turn a profit. The company's revenue growth has slowed over the past year, and its reported user growth has also steadily slowed since 2013.

In June, CEO Dick Costolo said he would be stepping down. Twitter cofounder Jack Dorsey, who is also CEO at payments startup Square, is currently filling in as interim CEO.

On Tuesday, Dorsey said the results showed good progress in monetization, "but we are not satisfied with our growth in audience."

To boost its growth, Twitter in recent months has released new features aimed at improving its service for both users and advertisers. In April, the company announced a new program for tracking and purchasing ads through Google's DoubleClick platform.

Some of the features are designed to help Twitter better capitalize on the real-time nature of its feed.

Last week, Twitter released a new tool to let advertisers target users around live events. For users, the company is preparing to launch a new feature known as Project Lightning, which would provide an easier way for people to track events as they unfold.

Twitter might also be able to capture a new mass of users through Periscope, the live streaming mobile app it acquired earlier this year.

More basic enhancements might also be on the way.

TV personality Kim Kardashian, in a recent tweet, said she had emailed Twitter to ask if they could provide an edit feature so you don't have to delete and re-post tweets after making a typo.

On Twitter, Dorsey responded: "Great idea!"

Twitter's stock was trading at around $38.50 in the after-market hours on Tuesday, up more than 5 percent. Twitter's stock had been rising much of the day prior to the release of its results.

Zach Miners covers social networking, search and general technology news for IDG News Service. Follow Zach on Twitter at @zachminers. Zach's e-mail address is zach_miners@idg.com

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Zach Miners

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