Key Takeaways
Twitter missed on user growth but beat on business metrics on both the top and bottom lines. While Costolo has been criticized for being unable to meaningfully increase the pace of user growth as seen with the likes of Instagram surpassing the number of monthly active users last quarter, Twitter is shaping up from a business front. 3rd party integration with Flipboard and Yahoo Japan have enabled Twitter to develop an intriguing new revenue stream through the use of syndicated Tweets. Among other points of interest for Analysts during the Q4 call include its recent partnership with Google from a data front as well as continued focus on video integration in timeline. Costolo and Noto noted that the partnership with Google is not rolling out for the next few months. This news, however, combined with Twitter’s recent partnership with IBM signal that the Company is continuing to place increasing importance on the prospect of leveraging infrastructure software and data analytics to appeal to a broader swath of customers.
Market Reaction
Despite relatively low user growth – adding only 4 million MAU on a sequential QoQ basis – Twitter’s share price meaningfully increased in after-hours trading. According to Leigh Drogen, CEO of Estimize, a crowd-sourced web platform which aggregates user input on stock estimates, it is interesting to note that “Web 2.0” is placing less emphasis on the size of the user base and more focus on user engagement and converting engaged users to paying customers. While it may be odd that Twitter is shying away from an emphasis on Timeline Views and Monthly Active Users as critical metrics to model the business, it’s ability to generate earnings imply that the Company is shaping up to fill the shoes of an attractive business model for advertisers and content creators.
Implications
Twitter is placing increased focus on its integration with enterprise software Companies (IBM, Google) and is poised to be a key partner in industries to leverage its appeal as an analytics and advertising partner.