Feathers fly as Twitter squawks of record sales but slow user growth

Twitter outperformed analysts' revenue estimates again this quarter, but investors, dismayed by another quarter of deep losses and slowing user growth, battered the company's stock anyway following its third-quarter 2014 earnings report.

The microblogging service posted a record $361.27m in revenue for the three months ending on September 30, which was a 114 per cent year-on-year increase. Its earnings met expectations at $0.01 per diluted share.

Advertising brought in most of the haul, at 87 per cent of the total. Of that lump, 85 per cent was from mobile advertising. All in all, advertising revenue was up 109 per cent from the year-ago period, which was solid but not as good as the 129 per cent ad-revenue hike of the previous sequential quarter.

Encouragingly, Twitter's data licensing and other businesses also showed impressive year-on-year growth. Although these sidelines only brought in $41.07m, that was more than triple what they did in last year's period.

Yet Twitter's net losses also widened in the quarter, by a gruesome 172 per cent versus a year ago. The $175.46m shortfall made for the company's worst quarterly loss since it ate a massive $521m charge for stock-based compensation expenses in Q4 of 2013, following its initial public offering.

More troubling for shareholders, however, was that Twitter still just isn't gaining and retaining users as quickly as it needs to. In fact, its growth actually appears to be slowing, triggering fears that it may soon plateau.

The service saw 284 million global monthly active users (MAUs) during the quarter, which CEO Dick Costolo described in a conference call with financial analysts as "the fuel that powers the entire system." Around 227 million of these were on mobile devices.

While total MAUs were up 22 per cent from the same period a year ago, however, they were only up 5 per cent from the previous sequential quarter. And in that quarter they were up 24 per cent, year-on-year. This is actually the second sequential quarter in which growth of MAUs shrank, which doesn't indicate a company with the momentum of firms like Facebook.

The same trend held true for Timeline views, a metric that Twitter uses to measure how engaged its users are with its service. Total Timeline views cracked 180 million in the quarter, which was up 14 per cent from the previous year's quarter. But in Q2 the figure was up 15 per cent, year-on-year, and Timeline views are only growing by about 4 per cent each sequential quarter.

Maybe that shouldn't matter. Ad revenue per 1,000 Timeline views was up 82 per cent in Q3, to $1.77. And while Timeline views still earned the most in the US, international revenue per 1,000 views is growing faster, up 133 per cent from the year-ago quarter.

Still, none of it was enough to appease Twitter's fickle shareholders, who were hoping to see much more tangible performance by now – or dare we say, something approaching a profit. Investors hit the company's stock hard following the news, sending its shares down nearly 3 per cent during the day and another 11 per cent after Monday's closing bell. ®