Social networking giant Twitter was flying high a year ago, when its wildly successful IPO filled the company’s coffers and seemed poised to usher in a new wave of consumer tech public offerings.
But the company’s performance in 2014 has been mixed. New users are still coming to the site, but at a relatively slow rate. Revenue is growing briskly, but so are losses. And a revolving door in the executive suite means that the company’s leadership is in flux. As the Wall Street Journal points out in a profile of CEO Dick Costolo, exactly what Twitter is and what it wants to be seems to be ever shifting.
Here's a recap of Twitter’s first year as a public company, grading its hits and misses.
Over the last four quarters, Twitter has added 52 million monthly active users, growing its userbase by about 22%. In the year prior, Twitter added 65 million new users and grew its base by about 39%. This decelerating growth has been the main narrative dogging Twitter during 2014 and drawn unwanted comparisons to Facebook, which is still growing at a healthy clip despite dwarfing Twitter in size. Costolo has tried to divert attention toward other Twitter growth metrics, like the number of people who see tweets embedded across the Web, but investors continue to be fixated on user numbers. On this front, Twitter looks like a maturing company, not a quickly growing one, which is a huge problem given its stated ambition of “building the largest daily audience in the world.”
Twitter roared out of the gate as a public company, jumping more than 70 percent from its IPO price of $26 per share during the first day of trading. Since then it’s been a rocky ride—the stock climbed above $70 amid a larger market rally at the end of 2013, then dove as low as $30 during the spring. Because investors (and perhaps the company itself) have yet to settle on exactly which metrics should be used to measure success, every quarterly earnings report from the company feels like a gamble. On Thursday, Twitter closed at $40.84. That’s well above the IPO price but perhaps not at the heights early investors dreamt were possible.
Everyone from tech pundits to Costolo himself have acknowledged that Twitter's main failing is that it can be hard for new users to understand. The company's made some cosmetic efforts to address this issue, by helping new users find interesting people to follow and revamping profile pages to make them more visually engaging. However, the core functionality of Twitter as an unending torrent of short messages filled with cryptic, site-specific shorthand remains unchanged. Twitter could make more changes to its core product to make it palatable to a wider audience—by presenting tweets based on an algorithm instead of chronological order, for instance—but such a move risks alienating the power users that provide so much of Twitter's content.
Twitter was famously unprofitable when it went public. The company now generates a small profit excluding some line items like stock-based compensation. But investors didn’t expect the company to make money in 2014 and its adjusted earnings have consistently exceeded Wall Street’s expectations. Revenue is also increasing at brisk pace, more than doubling to $361 million in the most recent quarter. The company also managed to increase the average revenue generated per 1,000 timeline views in each successive quarter this year. All in all, Twitter’s doing a good job monetizing its current userbase. The problem is that it hasn’t reached a level of scale that would allow it reach the revenue or profit levels of the biggest Internet companies.
From its inception, Twitter has had a tumultuous executive suite, but the hirings and firings have come at a torrid pace since the company went public. In the last year Twitter dumped its chief operating officer, its chief financial officer, its product chief, its vice president of media and its head of news. This ongoing shakeup has not yet led to a significant boost in user growth or a meaningful rethinking of the Twitter product. Instead it’s created confusion about the company’s direction.
Twitter has always shined most during big events, and the company worked hard this year to make the site an even more essential event destination. The biggest push came for the World Cup, when Twitter made a landing page full of curated tweets and live scores. Other big events included the Super Bowl (most tweeted ever), the Grammys and made-for-social TV programming like the ridiculous Sharknado movie. There was also Ellen Degeneres’ celebrity-studded Oscar selfie, which was retweeted more than 3.3 million times and generated gobs of free press for Twitter. The social network has effectively made its users’ conversations a relevant facet of virtually every heavily covered news event, whether it’s the Ebola outbreak or #AlexFromTarget.
All of Twitter’s big-time acquisitions still appear to be chocked full of potential. MoPub provides the basis for Twitter’s ad exchange and is front and center in the company’s new suite of developer tools to help app makers place ads in their programs. Twitter data licenser Gnip will help the company better monetize its firehose of tweets, which are a sought-after gauge of public sentiment for marketers and academics. And microvideo website Vine, which seemed like a curious oddity when first acquired in 2012, now racks up more than 1 billion video plays per day. Even if the growth of Twitter proper remains slow, the company can tap into other revenue sources.