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

Diplomats Work to Extend Israeli-Palestinian Cease-Fire

US Secretary of State John Kerry, diplomats from France, Britain, Germany, Italy, Turkey and Qatar gathered in Paris Saturday to discuss crisis More

Photogallery US Defense Department Warns of Arms to Eastern Ukraine

‘Imminent’ delivery of Russian rocket launcher poses threat to civilians, US says More

Video Researchers: Africa Genetically Modified Crops Held Back by Scaremongering

GM crops offer best hope of increasing productivity and coping with climate change in Africa, according to co-author of Chatham House report 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.
Astronauts Train in Underwater Labi
X
George Putic
July 25, 2014 7:25 PM
In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.
Video

Video Not Even Monks Spared From Thailand’s Junta-Backed Morality Push

With Thailand’s military government firmly in control after May’s bloodless coup, authorities are carrying out plans they say are aimed at restoring discipline, morality and patriotism to all Thais. The measures include a crackdown on illegal gambling, education reforms to promote students’ moral development, and a new 24-hour phone hotline for citizens to report misbehaving monks. Steve Sandford reports from Bangkok.
Video

Video Virtual Program Teaches Farming Skills

In a fast-changing world beset by unpredictable climate conditions, farmers cannot afford to ignore new technology. Researchers in Australia are developing an online virtual world program to share information about climate change and more sustainable farming techniques for sugar cane growers. As VOA's Zlatica Hoke reports, the idea is to create a wider support network for farmers.
Video

Video Airline Expert: Missile will Show Signature on Debris

The debris field from Malaysia Airlines Flight 17 is spread over a 21-kilometer radius in eastern Ukraine. It is expected to take investigators months to sort through the airplane pieces to learn about the missile that brought down the jetliner and who fired it. VOAs Carolyn Presutti explains how this work will be done.
Video

Video Treatment for Childhood Epilepsy Heats up Medical Marijuana Debate

In the United States, marijuana is classed as an illegal drug by the federal government. But nearly half the states have legalized it, to some degree. Proponents say some strains of marijuana might have exceptional health benefits, for treating pain or inflammation in chronic conditions such as cancer, multiple sclerosis and epilepsy. Shelley Schlender reports on a strain of medical marijuana developed in Colorado that is reputed to reduce seizures in childhood epilepsy
Video

Video Airbus Adds Metal 3D Printed Parts to New Jets

By the end of this year, European aircraft manufacturing consortium Airbus plans to deliver the first of its new, extra-wide-body passenger jets, the A350-XWB. Among other technological innovations, the new plane will also incorporate metal parts made in a 3-D printer. VOA's George Putic has more.
Video

Video AIDS Conference Welcomes Exciting Developments in HIV Treatment, Prevention

Significant strides have been made in recent years toward the treatment and prevention of HIV, the virus that causes AIDS. This year, at the International AIDS Conference, the AIDS community welcomed progress on a new pill that may prevent transmission of the deadly virus. VOA’s Anita Powell reports from Melbourne, Australia.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.

AppleAndroid

World Currencies

EUR
USD
0.7305
JPY
USD
101.53
GBP
USD
0.5830
CAD
USD
1.0656
INR
USD
60.075

Rates may not be current.