Twitter shares fall as user growth stalls

Twitter's stock price fell after it reported weak user growth in its Monday earnings report

Twitter still has work to do to gain more users, and grow its ad sales in the process, judging from Wall Street's reaction to its latest financial results.

The company's stock was US$44.85 in after-hours trading Monday, shortly after the results were announced, down nearly 8 percent from its close for the day of $48.56.

Sluggish user growth is probably to blame. Twitter had 284 million [m] users who visited the site at least once on a month during the third quarter ended Sept. 30, the company said. That's up 23 percent from the same period last year, according to Twitter, and in line with some analyst estimates projecting average monthly users in the 280 million range.

However, Twitter's report also shows it's gaining users at a slower rate sequentially compared with previous quarters.

Compared to the second quarter, Twitter grew its users by less than 5 percent, from 271 million [m] reported in July. That's a slightly slower than the 6 percent growth from the first quarter to the second quarter.

And from the fourth quarter of 2013 to the first quarter of 2014, Twitter grew its monthly users by just under 6 percent.

Twitter needs to add users more aggressively to turn its service into an advertising powerhouse. Last year the company accounted for 0.5 percent of global digital ad revenues, according to eMarketer, compared with 5.8 percent for Facebook.

Twitter has been trying to woo advertisers, partly through new ad formats such as embedded video in users' feeds and through enhanced targeting tools. But attracting advertisers without stronger user numbers is a tall order.

Twitter, which makes the bulk of its money through advertising, reported third-quarter revenue of $361 million, up 114 percent from a year earlier and beating the consensus estimate of $351 million from analysts polled by Thomson Reuters.

"We had another very strong financial quarter," said Twitter CEO Dick Costolo, in the company's announcement.

However, Twitter still hasn't turned a profit. It reported a net loss on Monday of $175 million, more than double the net loss it reported during the same period last year.

Adjusted earnings per share, which doesn't count certain items, was $0.01, meeting the analysts' estimates.

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

IDG News Service
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