Twitter more than doubles ad revenue in Q1, but still losing money as user growth fails expectations

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Twitter released its earnings report for Q1 2014, but instead of revenue or profitability, analysts at Wall Street turned to another number: monthly active users. Unfortunately, Twitter’s report of 255 million monthly active users showed meager growth of 25 percent year over year, and investors were hoping for more.

That figure is an increase of 5.8 percent quarter-over-quarter, up from 3.8 percent in Q4. Twitter has experienced a consistent decrease in the pace of its user growth over the last year, but Q1 marks a rebound for the company — although it’s minor. Analysts were expecting “strong growth” that signaled potential — MarketWatch reported that analysts expected 257 million users.

When asked during Tuesday’s earnings call about the specific factors driving growth on Twitter, CEO Dick Costolo was vague:

“I’d say that there was no specific one thing in the first quarter, one specific change, that was responsible for a majority of growth. It was a combination of some of the improvements in our recommendations and the global rollout.”

Despite slow user growth that failed to meet Wall Street’s expectations, the company announced $250 million in revenue — a 119 percent increase year-over-year. The company’s net loss of $130 million was also better than expected, as was its non-GAAP loss of $0.00 per share, which excludes stock-option compensation.

Much of the increase was due to Twitter’s ad revenue, which also experienced a big jump. Total ad revenue was $226 million for Q1, an increase of 125 percent year-over-year. Mobile advertising revenue accounted for 80 percent of that figure. In addition, data licensing programs earned $24 million, an increase of 75 percent year-over-year. On the earnings call, Costolo said that the company will introduce an integrating ad bidding system in Q2, designed to help marketers purchase various ads from a single platform.

“There are few other companies with this kind of reach, and we see a strategic opportunity to help marketers make the shift from desktop to the world,” Costolo said.

Twitter has made aggressive moves in 2014 to add more advertising units and gain better access to its own data (facilitated by its acquisition of Gnip earlier this month). It has also spent time altering its user experience, most notably with the introduction of new Twitter profiles.

“We still firmly believe that it will be the combination of changes that we make over the year, on that road map we’ve laid out for you, that will result in the growth of the platform. And we’re confident in that change based on the results we’ve seen this quarter,” Costolo said.

This post was updated several times Tuesday afternoon as more information became available.

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