Twitter shares plunge day after chief executive admits problems

Its second quarter revenue was $US502m, above forecasts of $470m to $485m.

By comparison, however, this time last year the company reported MAUs were up 24 per cent from Q2 of 2013, and mobile MAUs were up 29 per cent annually.

While Twitter reported on Wednesday an impressive 60 percent increase in revenue for the second quarter, it admitted that slow growth in number of users has hampered the company. In the preceding quarter, Twitter had 302 million monthly active users, a figure up from 288 million during its fourth quarter.

“Our Q2 results show good progress in monetization, but we are not satisfied with our growth in audience“, said Jack Dorsey, interim CEO of Twitter.

The company posted revenue of $502 million, up 61% on last year and way above expectations around $480 million.

Advertising revenue jumped 63% year-on-year to $452m, with mobile advertising accounting for 88% of that amount. Global revenue totaled $181 million, an increase of 78 percent.

But investors seemed pleased with the results, and Twitter’s share price climbed by more than 5 per cent on the news and continued upward in after-hours trading.

Shares of Twitter, which had popped as much as 6% after the earnings beat, quickly reversed course during the conference call and were trading down more than 12% after the earnings call ended.

Interestingly, while Twitter is trying to revamp its line-up of products, the company appears to have clamped down on research and development spending during the quarter.

But as for the day’s burning question of who will be picked as permanent CEO after Dick Costolo’s exit this month, Dorsey said,”We don’t have an update to provide today”. However, following a closer look at numbers, especially the numbers for user growth, investors became soured. “We expect it to take a considerable period of time”. Moreover, analysts never really expected something immaculate of Twitter, and a mere $0.04/share EPS estimate said everything.

Dorsey said the company would focus on more disciplined product execution, simplify the website and better communicate Twitter’s objective.

The main problem is that while the company’s service has widespread brand awareness of 95 percent in key markets around the world, its adoption rates in those markets are significantly lower… less than 30 percent, said Twitter CFO Anthony Noto.