News / Economy

Twitter Rides Mobile Wave in Shifting Internet Landscape

A man uses a mobile phone as he walks past the New York Stock Exchange ahead of Twitter IPO on November 7, 2013, in New York.
A man uses a mobile phone as he walks past the New York Stock Exchange ahead of Twitter IPO on November 7, 2013, in New York.
Reuters
Twitter Inc., whose stock has surged 150 percent since it went public in November, has a lot to live up to when it reports quarterly earnings for the first time on Wednesday.
 
A growing number of naysayers warn that Twitter's stock is greatly overpriced, and that even mediocre inaugural results could deflate its soaring valuation, now several times that of its closest social media peer, Facebook Inc.
 
But a clutch of earnings from the giants of the Internet sector last week suggest the company's mobile advertising business model is rooted in solid - and fertile - ground.
 
Facebook last week posted its strongest quarterly revenue growth in two years, even though 53 percent of its advertising revenue came from mobile users, once its Achilles heel. Facebook shares shot up 14 percent the day after the news.
 
That's a stark turnaround from 2013, when a shift in consumer behavior from PCs to mobile devices threatened to upend established advertising businesses, and forced powerhouse companies like Facebook to adapt to the changing times.
 
Facebook responded by aggressively shifting its emphasis from displaying banner ads to injecting paid marketing messages straight into the stream of updates shown to every user called the newsfeed - a model originally refined by Twitter and one ideally suited for viewing on small smartphone screens.
 
“Mobile continues to drive our growth,” David Ebersman, Facebook's chief financial officer, told analysts last Wednesday. “The key driver of ad revenue growth continued to be the strong performance of newsfeed ads on mobile and desktop.”
 
Facebook's successful transition to mobile bodes well for Twitter, which similarly places ads called “promoted tweets” into users' timelines. But it highlights a tough road ahead for companies that rely on selling ads on the periphery of websites.
 
Last week, Google Inc and Yahoo Inc  reported declines in ad prices during the fourth quarter, as marketers hesitated to pay for display ads at a time they are increasingly viewed on cramped smartphone screens rather than PC displays.
 
Google offset those declines by boosting the overall volume of its ads thanks to its massive reach. Yahoo appeared to face a greater challenge as it grapples with how to revamp its products for mobile audiences, analysts say.
 
Yahoo's stock has slid 8 percent in the week since its earnings call.
 
“Any company that has not been successful transitioning to mobile has just not been successful in this next leg of Internet growth,” said Ryan Jacob, chief executive of the Jacob Funds, which owns shares of Google, Yahoo and Facebook.
 
Setting expectations
 
Even if Twitter's business model appears firmly grounded, questions remain over whether future expectations are outpacing its present-day financial performance.
 
Twitter closed 1 percent higher at $65 a share on Monday. At that price, the stock is at 32 times expected 2014 sales, compared to 14 times for Facebook and 12 times for LinkedIn Corp , according to Thomson Reuters data.
 
Currently, seven analysts recommend or strongly recommend buying the stock, 13 rate it as “hold”, and 11 have it as “underperform” or “sell.” That's up from seven sell-equivalents a month ago, and five just two months ago, right after its market debut.
 
Although some tech companies, including Facebook and Google, do not offer financial outlooks, several analysts said they hoped Twitter's management would comment on the company's near-term potential, given the stock has divided investor opinion.
 
“It'd be important to provide any kind of guidance, any kind of framework to bring everyone in line,” said Neil Doshi, an analyst with CRT Capital “If they don't, we'll see greater volatility in the stock.”
 
Wall Street expects the company to announce $218 million in revenue for the fourth quarter.
 
Robert Peck, an analyst with Suntrust Robinson who was among the first Street prognosticators to slap a “buy” on Twitter before downgrading to neutral in December, said the metric to watch will be its user numbers.
 
Twitter had 232 million monthly users at the end of September, but its current valuation is predicated on the belief it could expand its appeal and eventually grow to a scale close to Facebook's, which has five times more users, he said.
 
“The question is: 'What gets my mom to sign up for your service?”' Peck said.
 
Twitter also lags in its ability to wring revenue out of every member. It is expected to chalk up revenue of $639.42 mln in 2013, or about $3 per user. Facebook's gets about $6 per user.
 
Analysts will also be looking to hear if Twitter has made progress in introducing a commerce platform, which would allow it to take a cut of any transactions it facilitates.
 
The company has openly alluded to its e-commerce ambitions. It hired former Ticketmaster president Nathan Hubbard as commerce chief, and in December it introduced a multimedia tweet format specifically designed to showcase a product.
 
“They have a number of potential options for monetization,” said Doshi. “From management's perspective it boils down to, 'What are the most important things?' and to execute against that.”

You May Like

On Everest, Helicopters Rescue Stranded Climbers

Choppers transport some of more than 100 mountaineers trapped after deadly quake, avalanches More

Video Ten Years After Riots, France Searches for Answers to Neglected Suburbs

In 2005, a Paris suburb exploded into violence after two teenagers were electrocuted as they hid from police; since then, somethings have changed, others not More

US, Japan Announce Historic Revision of Defense Cooperation Guidelines

Nations say new guidelines will be 'cornerstone for peace and security' in Asia-Pacific region while also serving as 'platform for a more stable international security environment' More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
‘Angel of the Migrants’ Helps Desperate Syrians Arriving in Europei
X
Henry Ridgwell
April 26, 2015 10:36 PM
Waves of migrants are continuing to arrive on the shores of southern Italy from North Africa. After their dangerous journey across the Mediterranean, they face an unknown future in Europe. In the Sicilian city of Catania there is an activist dedicated to helping the refugees on their journey.
Video

Video ‘Angel of the Migrants’ Helps Desperate Syrians Arriving in Europe

Waves of migrants are continuing to arrive on the shores of southern Italy from North Africa. After their dangerous journey across the Mediterranean, they face an unknown future in Europe. In the Sicilian city of Catania there is an activist dedicated to helping the refugees on their journey.
Video

Video Ten Years After Riots, France Searches for Answers to Neglected Suburbs

January’s terrorist attacks and fears of more to come are casting a spotlight on France’s neglected suburbs. Home to many immigrants, and sometimes hubs of crime, they were rocked by rioting a decade ago. Lisa Bryant visited the Paris suburb of Clichy-sous-Bois, where the 2005 violence first broke out, and has this report about what has changed and what has not.
Video

Video Gay Marriage Goes Before US Supreme Court

This week, the U.S. Supreme Court will hear arguments on whether gay people have a constitutional right to marriage. VOA’s Michael Bowman reports, the case could lead to the nationwide legalization of same-sex marriage, or a continuation of the status quo in which individual states decide whether to recognize gay unions.
Video

Video Study: Insecticide Damaging Wild Bee Populations

A popular but controversial type of insecticide is damaging important wild bee populations, according to a new study. VOA’s Steve Baragona has more.
Video

Video Data Servers Could Heat Private Homes

As every computer owner knows, when their machines run a complex program they get pretty hot. In fact, cooling the processors can be expensive, especially when you're dealing with huge banks of computer servers. But what if that energy could heat private homes? VOA’s George Putic reports that a Dutch energy firm aims to do just that.
Video

Video Cinema That Crosses Borders Showcased at Tribeca Film Festival

Among the nearly 100 feature length films being shown at this year’s Tribeca Film Festival in New York City are more than 20 documentaries and features with international appeal, from a film about a Congolese businessman in China, to documentaries shot in Pakistan and diaspora communities in the U.S., to a poetic look at disaffected South African youth. VOA’s Carolyn Weaver has more.
Video

Video UN Confronts Threat of Young Radicals

The radicalization and recruitment of young people into Islamist extremist groups has become a growing challenge for governments worldwide. On Thursday, the U.N. Security Council heard from experts on the issue, which has become a potent threat to international peace and security. VOA’s Margaret Besheer reports.
Video

Video Growing Numbers of Turks Discover Armenian Ancestry

In a climate of improved tolerance, growing numbers of people in Turkey are discovering their grandmothers were Armenian. Hundreds of thousands of Armenians escaped the mass deportations and slaughter of the early 1900's by forced conversion to Islam. Or, Armenian children were taken in by Turkish families and assimilated. Now their stories are increasingly being heard. Dorian Jones reports from Istanbul that the revelations are viewed as an important step.
Video

Video Migrants Trek Through Western Balkans to Reach EU

Migrants from Africa and other places are finding different routes into the European Union in search of a better life. The Associated Press followed one clandestine group to document their trek through the western Balkans to Hungary. Zlatica Hoke reports that the migrants started using that route about four years ago. Since then, it has become the second-most popular path into Western Europe, after the option of sailing from North Africa to Italy.
Video

Video US Businesses See Cuba as New Frontier

The Obama administration's opening toward Cuba is giving U.S. companies hope they'll be able to do business in Cuba despite the continuation of the U.S. economic embargo against the communist nation. Some American companies have been able to export some products to Cuba, but the recent lifting of Cuba's terrorism designation could relax other restrictions. As VOA's Daniela Schrier reports, corporate heavy hitters are lining up to head across the Florida Straits - though experts urge caution.
Video

Video Kenya Launches Police Recruitment Drive After Terror Attacks

Kenya launched a major police recruitment drive this week as part of a large-scale effort to boost security following a recent spate of terror attacks. VOA’s Gabe Joselow reports that allegations of corruption in the process are raising old concerns about the integrity of Kenya’s security forces.
Video

Video Japan, China in Race for Asia High-Speed Rail Projects

A lucrative competition is underway in Asia for billions of dollars in high-speed rail projects. Cambodia, India, Indonesia, Malaysia Thailand and Vietnam are among the countries planning to move onto the fast track. They are negotiating with Japan and the upstart Chinese who are locked in a duel to revolutionize transportation across Asia. VOA Correspondent Steve Herman in Bangkok has details.
Video

Video Scientists: Mosquitoes Attracted By Our Genes

Some people always seem to get bitten by mosquitoes more than others. Now, scientists have proved that is really the case - and they say it’s all because of genes. It’s hoped the research might lead to new preventative treatments for diseases like malaria, as Henry Ridgwell reports from London.
Video

Video Bible Museum Coming to Washington DC

Washington is the center of American political power and also home to some of the nation’s most visited museums. A new one that will showcase the Bible has skeptics questioning the motives of its conservative Christian funders. VOA religion correspondent Jerome Socolovsky reports.
Video

Video Afghan First Lady Pledges No Roll Back on Women's Rights

Afghan First Lady Rula Ghani, named one of Time's 100 Most Influential, says women should take part in talks with Taliban. VOA's Rokhsar Azamee has more from Kabul.

VOA Blogs

World Currencies

EUR
USD
0.9240
JPY
USD
119.41
GBP
USD
0.6618
CAD
USD
1.2155
INR
USD
63.567

Rates may not be current.