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

Lion Cecil's Killing Sparks 'Canned Hunting' Debate in S. Africa

Conservationists believe incident, which triggered worldwide outrage, will reshape debate about practice in which hunters are allowed to target animals bred for hunting More

Taliban's New Leader Says Jihad Will Continue

Top US Afghan diplomat also meets with Pakistani, Afghan officials following news of Mullah Omar's death More

Environmentalists Issue Warning on Mekong Biodiversity

Scientists say decades of economic development, hydropower-dam construction, lax law enforcement and trafficking have taken their toll 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 Underwater for Deep Space Missionsi
|| 0:00:00
...    
🔇
X
George Putic
July 30, 2015 8:59 PM
Manned deep space missions are still a long way off, but space agencies are already testing procedures, equipment and human stamina for operations in extreme environment conditions. Small groups of astronauts take turns in spending days in an underwater lab, off Florida’s southern coast, simulating future missions to some remote world. VOA’s George Putic reports.
Video

Video Astronauts Train Underwater for Deep Space Missions

Manned deep space missions are still a long way off, but space agencies are already testing procedures, equipment and human stamina for operations in extreme environment conditions. Small groups of astronauts take turns in spending days in an underwater lab, off Florida’s southern coast, simulating future missions to some remote world. VOA’s George Putic reports.
Video

Video Civil Rights Leaders Struggled to Achieve Voting Rights Act

Fifty years ago, lawmakers approved, and U.S. President Lyndon Johnson signed, the Voting Rights Act of 1965. The measure outlawed racial discrimination in voting, giving millions of blacks in many parts of the southern United States federal enforcement of the right to vote. Correspondent Chris Simkins introduces us to some civil rights leaders who were on the front lines in the struggle for voting rights.
Video

Video Booming London Property a ‘Haven for Dirty Money’

Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Hometown of Boy Scouts of America Founder Reacts to Gay Leader Decision

Ottawa, Illinois, is the hometown of W.D. Boyce, who founded the Boy Scouts of America in 1910. In Ottawa, where Scouting remains an important part of the legacy of the community, the end of the organization's ban on openly gay adult leaders was seen as inevitable. VOA's Kane Farabaugh reports.
Video

Video 'Metal Muscles' Flex a New Bionic Hand

Artificial limbs, including the most complex of them – the human hand – are getting more life-like and useful due to constant advances in tiny hydraulic, pneumatic and electric motors called actuators. But now, as VOA’s George Putic reports, scientists in Germany say the future of the prosthetic hand may lie not in motors but in wires that can ‘remember’ their shape.
Video

Video Russia Accused of Abusing Interpol to Pursue Opponents

A British pro-democracy group has accused Russia of abusing the global law enforcement agency Interpol by requesting the arrest and extradition of political opponents. A new report by the group notes such requests can mean the accused are unable to travel and are often unable to open bank accounts. VOA's Henry Ridgwell reports.
Video

Video 'Positive Atmosphere' Points Toward TPP Trade Deal in Hawaii

Talks on a major new trade agreement among 12 Pacific Rim nations are said to be nearing completion in Hawaii. Some trade experts say the "positive atmosphere" at the discussions could mean a deal is within reach, but there is still hard bargaining to be done over many issues and products, including U.S. drugs and Japanese rice. VOA's Jim Randle reports.
Video

Video Genome Initiative Urgently Moves to Freeze DNA Before Species Go Extinct

Earth is in the midst of its sixth mass extinction. The last such event was caused by an asteroid 66 million years ago. It killed off the dinosaurs and practically everything else. So scientists are in a race against time to classify the estimated 11 million species alive today. So far only 2 million are described by science, and researchers are worried many will disappear before they even have a name. VOA’s Rosanne Skirble reports.
Video

Video Scientists: One-Dose Malaria Cure is Possible

Scientists have long been trying to develop an effective protection and cure for malaria - one of the deadliest diseases that affects people in tropical areas, especially children. As the World Health Organization announces plans to begin clinical trials of a promising new vaccine, scientists in South Africa report that they too are at an important threshold. George Putic reports, they are testing a compound that could be a single-dose cure for malaria.
Video

Video 'New York' Magazine Features 35 Cosby Accusers

The latest issue of 'New York' magazine features 35 women who say they were drugged and raped by film and television celebrity Bill Cosby. The women are aged from 44 to 80 and come from different walks of life and races. The magazine interviewed each of them separately, but Zlatica Hoke reports their stories are similar.
Video

Video US Calls Fight Against Human Trafficking a Must Win

The United States is promising not to give up its fight against what Secretary of State John Kerry calls the “scourge” of modern slavery. Officials released the country’s annual human trafficking report Monday – a report that’s being met with some criticism. VOA’s National Security correspondent Jeff Seldin has more from the State Department.
Video

Video Washington DC Underground Streetcar Station to Become Arts Venue

Abandoned more than 50 years ago, the underground streetcar station in Washington D.C.’s historic DuPont Circle district is about to be reborn. The plan calls for turning the spacious underground platforms - once meant to be a transportation hub, - into a unique space for art exhibitions, presentations, concerts and even a film set. Roman Mamonov has more from beneath the streets of the U.S. capital. Joy Wagner narrates his report.
Video

Video Europe’s Twin Crises Collide in Greece as Migrant Numbers Soar

Greece has replaced Italy as the main gateway for migrants into Europe, with more than 100,000 arrivals in the first six months of 2015. Many want to move further into Europe and escape Greece’s economic crisis, but they face widespread dangers on the journey overland through the Balkans. VOA's Henry Ridgwell reports.
Video

Video Stink Intensifies as Lebanon’s Trash Crisis Continues

After the closure of a major rubbish dump a week ago, the streets of Beirut are filling up with trash. Having failed to draw up a plan B, politicians are struggling to deal with the problem. John Owens has more for VOA from Beirut.
Video

Video Paris Rolls Out Blueprint to Fight Climate Change

A U.N. climate conference in December aims to produce an ambitious agreement to fight heat-trapping greenhouse gases. But many local governments are not waiting, and have drafted their own climate action plans. That’s the case with Paris — which is getting special attention, since it’s hosting the climate summit. Lisa Bryant takes a look for VOA at the transformation of the French capital into an eco-city.

VOA Blogs

World Currencies

EUR
USD
0.9118
JPY
USD
124.31
GBP
USD
0.6420
CAD
USD
1.3048
INR
USD
64.136

Rates may not be current.