At the moment, social media is a minefield for Twitter. Compared to the efforts of their rivals, like Facebook, in upping the stakes, Twitter has failed to match the momentum, and their stock has suffered because of it. The results of the company’s first quarter were posted on Tuesday, and Twitter executives lost face with their investors, all due to their low quarterly earnings being leaked ahead of schedule. In an effort to exercise damage control, Twitter advised that their investors lower their expectations for the remainder of 2015.
The company’s stock, after the quarterly report was posted by Selerity and before the market officially closed, was lower by 18 percent. While Twitter did collect 74 percent more revenue in the first quarter, it was not the number they expected. The company figured they would reach a 95-100 percent ballpark to be comparable to what they did in the final quarter of 2014. The executives believe the drop can be traced to their advertising department.
On Twitter, certain ads are only seen if a consumer purchases an app, rather than when they open it. Analysts believe the company would be better off refusing to use direct-response ads. Debra Williamson, from the research firm eMarketer, said that the relationship goes both ways. Twitter has yet to learn how to appropriately use direct-response ads, and vice versa.
Many analyst and research firms, along with investors, are thinking that the management of the social media company should drop some of their executives, namely Dick Costolo. Investors have been more attentive to his actions since 2013. Mark Mahaney from RBC Capital Markets sent a note to investors to say that the management has to devise a new way to address their credibility in order to reassure shareholders. Twitter executives will;’ have to find a way to make due on their next quarter, garnering much more than the low earnings of this one, to avoid losing face with investors a second time.
The battle for ad space is a fierce one, especially while being split with other social apps and sites like Facebook and Snapchat. Costolo’s monetization of their ads was exactly what their investors hoped would bring more customers to them. Richard Greenfield from BTIG Research wondered if it was the tweeting company’s errors in their advertising model, or their steep competition, that has their stock falling so low.
Costolo hosted a conference call with several analysts and explained that it is likely their new product models will not generate impressive results soon. He noted that the products are the first of their kind and will need to be advertised quite a bit longer. Costolo, on a more positive stance, said that the recent company development of allowing users to tweet videos from cellular apps has resulted in record growth of their mobile services.
In the cellular aspect of their business, the real-time network company has been successful in their advertising. However, Yahoo! and Facebook have also been dominating in that area as well.
After the stock drop on Tuesday, Twitter forged a partnership with Google to help increase their advertising in hopes of better quarterly reports. In the future of 2015, using Google’s DoubleClick program, other agencies and organizations will more easily be able to purchase ads from Twitter, and analysts can keep tabs on the numbers through Google Analytics. The team-up with Google, along with TellApart, a technological corporation with specialized programs for direct-response marketing, should help Twitter to keep from losing face with investors, even if the due earnings are leaked, because they might be at the level their investors desire.
By Matthew Austin Bowers