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Twitter revenue grows sharply but user growth stays slow

Published 29/07/2015

Twitter is not satisfied with the growth of its audience, despite growing revenue
Twitter is not satisfied with the growth of its audience, despite growing revenue

Twitter has failed to add users at a quick enough pace for investors in the second quarter, even as revenue grew sharply, feeding concerns about whether it can ever become a mass-market service like Facebook or Google.

The beleaguered company is searching for a permanent chief executive to replace Dick Costolo, who stepped down at the beginning of this month. Co-founder and chairman Jack Dorsey is serving as interim CEO.

Mr Dorsey said that while the results showed "good progress in monetisation", the company was "not satisfied" with the growth of its audience.

On average, Twitter had 316 million monthly active users in the second quarter, up 15% year-over-year but up less than 3% from the first quarter of this year.

Twitter's finance chief Anthony Noto said the company did not expect to see "sustained, meaningful growth" of its user base until it reached the mass market. He did not say when that would be, only that it would take a considerable amount of time.

While many people are familiar with Twitter, the company has not been able to convince people that they need it. Twitter also "remains too difficult to use", Mr Noto said in a conference call broadcast on Twitter's live-streaming service Periscope.

The assessment hammered Twitter's stock in after-hours trading. After jumping in the first minutes following the release of the earnings report, the stock did an about-face and shed more than 10% to 32.88 dollars.

San Francisco-based Twitter posted a loss of 136.7 million dollars (£87.6m), or 21 cents per share, in the April-June period. That compares with a loss of 144.6 million dollars (£92.7m), or 24 cents per share, a year earlier.

Adjusted earnings were seven cents per share, above the five cents that analysts surveyed by Zacks Investment Research had expected.

Revenue jumped 61% to 502.4 million dollars (£322m) from 312.2 million (£200m). Analysts had expected lower revenue of 487.4 million (£312.4m).

User growth has been an ongoing challenge for Twitter, as it tries to make its service a widely used product rather than a niche short-messaging service popular with journalists, celebrities and young people.

For the current quarter ending in September, Twitter says it expects revenue in the range of 545 to 560 million dollars. Analysts surveyed by Zacks expected revenue of 563.9 million.

The company expects full-year revenue in the range of 2.2 billion dollars (£1.4bn) to 2.27 billion (£1.45bn).

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