State of Social 1Q14: Twitter, reasons for optimism, the next big thing

Twitter released its second quarterly results report as a publicly traded company, detailing its numbers for the first quarter of 2014. As soon as the numbers came in, Wall Street reacted negatively, punishing the stock with a 11% decline in after hours trading. The headlines were equally dramatic:

Twitter stock drops 11% despite revenue growth – LA Times
Twitter beats estimates but growth fails to impress – USA Today
Revenue Up at Twitter, but Growth Is a Worry – NY Times
Twitter User Growth Dip Drives Stock to Lowest Since Debut – Bloomberg

Who has the right of it here? Is the social network headed for the land of the passenger pigeon and the dodo?

Not so fast. Let’s see where Twitter actually stands. It’s currently at 255 million monthly active users:

Slide06

Note that in the graph above, we’ve superimposed a 4-period moving average, meaning the moving average across four quarters, or the year. Twitter isn’t in danger of crossing under its 4-period moving average, which would be a clear indicator that its growth is in danger. Alarmist headlines be damned.  As far as how fast it is or isn’t growing, let’s take a look:

Slide07

Here, the monthly active user growth rate has actually increased and converged with the 4-period moving average. Growth, contrary to the headlines above, is headed in the right direction. 4Q2013 was definitely soft, with a 4% growth rate, but Twitter is back to 6% growth. How about the revenue perspective? Is Twitter on solid ground?

Slide08

At first, it looks like revenue was flat. Remember, however, from Facebook’s quarterly report, that there’s a trend of the first quarter of each year showing little to no growth because of how aggressively companies spend on B2C advertising in the fourth quarter and how drastic the pullback is in the first quarter. When we look at the revenues from advertising and their rate of change:

Slide09

We see that Twitter remains ahead of Facebook in the revenue game, at least in terms of rate of change. Twitter has not gone negative in the first quarter either this year or last year, whereas Facebook was down -8%, -6%, and -3% for its first quarters in recent years. Twitter has shown the same year over year growth bump in the first quarter that Facebook has – even in soft periods, both are growing revenue. To dig in a bit more, let’s look at Twitter’s revenue per user:

Slide10

Revenue isn’t just up, revenue is trending up and accelerating. The trend line is curving upwards, a positive, powerful sign that Twitter has got revenue going strong. These numbers would suggest that Twitter is on solid footing.

What does all of this mean for marketing and communications professionals?

Marketing and communications professionals should be leveraging Twitter’s platform for advertising, paid media, syndication, and retargeting. The sooner marketers and PR professionals can learn all of Twitter’s media options, the sooner they can amplify the impact of their earned media campaigns.

Twitter CEO Dick Costolo trumpeted that with the integration of MoPub, Twitter is now the largest in-app mobile ad exchange (something that Facebook is likely to offer at this week’s F8 conference) with over 1 billion iOS and Android users. In-app mobile ad exchanges, to the extent that there is a next big thing, are going to be a next big thing. Especially as options become generally available for businesses of all sizes. Despite the headlines, everything is looking very good for Twitter in the coming quarters.

Consider that according to Edison Research, smartphones have achieved 78% penetration into the US 12-24 population, and suddenly native advertising inside mobile apps is a giant opportunity. As MoPub rolls out, be prepared to spend more on native advertising in mobile to complement your earned and owned media wins. The ability to show ads in mobile apps for everything from an earned media hit to the latest product launch will be a huge boon to marketing communicators; plan accordingly by developing your integrated marketing strategy now.

Christopher S. Penn
Vice President, Marketing Technology

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Posted on April 30, 2014 in Advertising, Marketing, Social Media, Twitter

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About the Author

Christopher S. Penn is an authority on digital marketing and marketing technology. A recognized thought leader, author, and speaker, he has shaped three key fields in the marketing industry: Google Analytics adoption, data-driven marketing and PR, and email marketing. Known for his high-octane, here’s how to get it done approach, his expertise benefits companies such as Citrix Systems, McDonald’s, GoDaddy, McKesson, and many others. His latest work, Leading Innovation, teaches organizations how to implement and scale innovative practices to direct change.

Christopher is a highly-sought keynote speaker thanks to his energetic, informative talks. In 2015, he delivered insightful, innovative talks on all aspects of marketing and analytics at over 30 events to critical acclaim.

He is a founding member of IBM’s Watson Analytics Predictioneers, co-founder of the groundbreaking PodCamp Conference, and co-host of the Marketing Over Coffee marketing podcast.

Christopher is a Google Analytics Certified Professional and a Google AdWords Certified Professional. He is the author of over two dozen marketing books including bestsellers such as Marketing White Belt: Basics for the Digital Marketer, Marketing Red Belt: Connecting With Your Creative Mind, and Marketing Blue Belt: From Data Zero to Marketing Hero.

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