Twitter reaches 300 million active users, investor expectations not met

Despite 300 million users and an active role in the merger and acquisition space, Twitter has yet to meet investors' expectations

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Microblogging website Twitter has reached 300 million active users since its launch in March 2006. Many people use Twitter to follow celebrities, talk about TV shows and movies, and communicate with the world using only 140 characters. Twitter has been used not only as a personal microblogging platform, but also by businesses and journalists in their day-to-day operations as well.

Some of this success can be attributed to Twitter’s aggressive merger and acquisition approach, which has targeted a host of companies and enabled the firm to diversify their large portfolio of products and services. Since its launch, Twitter has acquired many different companies that provide services ranging from analytics, advertising, marketing, training services, big data, payment applications, and more.

On the same day that it reached this 300-million-user milestone, however, Twitter endured some financial heartburn, as an early leak of its quarterly earnings prompted a sudden drop in the company’s share price.

Despite its active role in the merger and acquisition space and constantly growing user base, Twitter fell short of investor expectations. “Total revenue was $436 million, up 74% year-over-year … after five consecutive quarters of more than 97% year-over-year revenue growth, we underperformed against our expectations,” said Twitter CEO Dick Costolo in the firm’s quarterly earnings call. “We anticipate the factors that affected our first quarter results will also affect our 2015 guidance,”

Related: Twitter plays around again with new design for search results

Anthony Noto, Twitter’s CFO, explained the reasons behind the company falling short of investor expectations. “Two factors impacted the results,” he said. “First, some advertisers limited spending at higher levels of scale because the bids required to win incremental auctions were higher than they were willing to pay, which limited additional spending. Second, we have improved the quality of leads for direct response advertisers using our Website Cards by raising the bar on what constitutes an engagement or click. The higher bar provides significantly increased value to advertisers because we are delivering users further down the marketing funnel.”

Costolo also talked about Periscope, which the company acquired in March for around $100 million. The live-video streaming app allows for mobile users to share video instantly on the social networking website. “We introduced Periscope providing people with a way to share, watch and be an active participant in immersive live video experiences directly from their phones,” he said.

CEO Costolo separately discussed the success of the app during the earnings call. “In just the first 10 days alone, more than 1 million people signed into the app and even more have tuned in to live broadcast through the web. This is possible because broadcasters on Periscope can share their Periscopes to Twitter to reach a larger audience,” he also said.

Although Twitter is gaining more active users, only time will tell what role Periscope will play in driving the firm to its next milestone.

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