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

Video Indiana Controversy Points to Divergent Notions of Religious Freedom

Arkansas, North Carolina have approved similar laws that gay-marriage opponents say help maintain their beliefs in face of changing culture More

UNICEF Denies North Korean Measles Outbreak

Agency dismisses Russian media report after government, WHO assurances More

Turkey Seen Taking Harder Stance Against Militant Kurds

Stance comes as President Recep Tayyip Erdogan is being seen as moving closer to generals 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.
Indiana Controversy Highlights Divergent Meanings of Religious Freedomi
X
Jerome Socolovsky
April 01, 2015 1:41 AM
Indiana’s state government has triggered a nationwide controversy by approving a law that critics say is aimed at allowing discrimination against gays and lesbians. The controversy stems from divergent notions of religious freedom in America. VOA's Jerome Socolovsky reports.
Video

Video Indiana Controversy Highlights Divergent Meanings of Religious Freedom

Indiana’s state government has triggered a nationwide controversy by approving a law that critics say is aimed at allowing discrimination against gays and lesbians. The controversy stems from divergent notions of religious freedom in America. VOA's Jerome Socolovsky reports.
Video

Video Nigerians Welcome Buhari's Return to Power

Crowds of jubilant Nigerians nationwide have celebrated the return to power of former military ruler Muhammadu Buhari. The retired army general won this year's presidential election with more than 2 million votes more than incumbent President Goodluck Jonathan. Buhari's supporters hope he can strengthen the country's economy and security once he takes office in late May. Zlatica Hoke has this story.
Video

Video Report: State of Black America a 'Tale of Two Nations'

The National Urban League has described this year's "State of Black America" report as a "tale of two nations." The group's annual report, released earlier this month (March), found that under an equality index African Americans had only 72% parity compared to whites in areas such as education, economics, health, social justice and civic engagement. It’s a gap that educators and students at Brooklyn’s Medgar Evers College are looking to close. VOA's Daniela Schrier reports from the school.
Video

Video Film Tells Story of Musicians in Mali Threatened by Jihadists

At this year's annual South by Southwest film and music festival in Austin, Texas, some musicians from Mali were on hand to promote a film about how their lives were upturned by jihadists who destroyed ancient treasures in the city of Timbuktu and prohibited anyone from playing music under threat of death. As VOA’s Greg Flakus reports from Austin, some are afraid to return to their hometowns even though the jihadists are no longer in control there.
Video

Video Gamma Ray Observatory to Open Soon in Mexico

American and Mexican scientists have completed construction of the world's largest gamma ray observatory, situated high in central Mexico’s Sierra Negra Mountain. The observatory's huge array of water-based detectors will soon start discovering secrets about black holes and supernovas. VOA’s George Putic reports.
Video

Video Ebola Vaccine Trials Underway in West Africa

Ebola has claimed the lives of more than 10,000 people in West Africa. Since last summer, researchers have rushed to get anti-Ebola vaccines into clinical trials. While it's too early to say that any of the potential vaccines work, some scientists say they are seeing strong results from some of the studies. VOA's Carol Pearson reports.
Video

Video Philippines Wants Tourists Spending Money at New Casinos

Tourism is a multi-billion dollar industry in the Philippines. Close to five million foreign visitors traveled there last year, perhaps lured by the country’s tropical beaches. But Jason Strother reports from Manila that the country hopes to entice more travelers to stay indoors and spend money inside new casinos.
Video

Video Civilian Casualties Push Men to Join Rebels in Ukraine

The continued fighting in eastern Ukraine and the shelling of civilian neighborhoods seem to be pushing more men to join the separatist fighters. Many of the new recruits are residents of Ukraine made bitter by new grievances, as well as old. VOA's Patrick Wells reports.
Video

Video Islamic State Prisoners Talk of Curiosity, God, Regret

Islamic State fighter, a prisoner of Kurdish YPG forces, asked his family asking for forgiveness: "I destroyed myself and I destroyed them along with me." The Syrian youth was one of two detainees who spoke to VOA’s Kurdish Service about the path they chose; their names have been changed and identifying details obscured. VOA's Zana Omer reports.
Video

Video Germanwings Findings Raise Issue of Psychological Testing for Pilots

More is being discovered about the co-pilot in the crash of Germanwings Flight 9525 in the French Alps. Investigators say he was hiding a medical condition, raising questions about the mental qualifications of pilots. VOA's Carolyn Presutti reports.
Video

Video Liberia's Almost Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Cambodian Land Grabs Threaten Traditional Communities

Indigenous communities in Cambodia's Ratanakiri province say the government’s economic land concession policy is taking away their land and traditional way of life, making many fear that their identity will soon be lost. Local authorities, though, have denied this is the case. VOA's Say Mony went to investigate and filed this report, narrated by Colin Lovett.

VOA Blogs

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

World Currencies

EUR
USD
0.9220
JPY
USD
119.88
GBP
USD
0.6757
CAD
USD
1.2640
INR
USD
62.626

Rates may not be current.