Twitter shares soared on Q2 results

Twitter shares soared more than 30% in early trading after posting a year-over-year revenue jump of 124% to $312.2 million and a 24% monthly active user (MAU) increase to 271 million in Q2 2014, boosted by FIFA World Cup related demand.

The company added 16 million new users during the second quarter – 3 million in the US and 13 million elsewhere.

Although the microblogging giant posted an increased net loss of $144.6 million, it forecast sales for the current quarter that exceeded predictions and increased its full-year guidance.

World Cup helped up numbers

Dick Costolo, Twitter’s CEO, said:

“Our strong financial and operating results for the second quarter show the continued momentum of our business. We remain focused on driving increased user growth and engagement, and by developing new product experiences, like the one we built around the World Cup, we believe we can extend Twitter’s appeal to an even broader audience.”

In a CNBC interview, Mr. Costolo emphasized that use growth was not just driven by the World Cup, in an effort to reassure investors who may wonder whether it might not be able to hold onto the users it gained during the tournament.

Even so, while over-delivering on several metrics, the company how has to show it can repeat the revenue and user increase. No matter what Costolo says, investors will still be watching to see whether it can continue to surprise without a big international event.

After two consecutive quarters of lackluster user growth following its initial public offering in November, investors had been suggesting that perhaps Twitter’s rapid growth was over. For several months analysts had been saying that Twitter was overvalued.

Its problems are by no means over. Net loss was over triple last year’s $42 million, while total expenses reached $462.1 million in Q2 2014, compared to $178.2 million one year ago.

Twitter Q2 2014 Financials

(Data source: Twitter)

Twitter usage per active user increasing

However, active users are viewing their Twitter timeliness more frequently, with 173 billion views in Q2 compared to 157 million in Q2 2013.

Twitter says it is in a much stronger position to engage users thanks to new tools, including voting ballots and real-time scoring during the World Cup, as well as new user profiles that looked similar to Facebook’s.

Advertising revenue increased by 129% to $277 million year-over-year in the second quarter, most of it from mobile advertising.

The company says it was able to bolster capabilities for advertisers and expand its ad business into new geographical regions.

According to Twitter, over 78% of its users accessed the service on their handheld devices.

Don’t count Twitter numbers like Facebook’s

Investors have been unreasonably using Facebook’s model when assessing Twitter’s growth, the company says.

Mr. Costolo says that people have been counting incorrectly. Twitter has 271 million MAUs, but that is only one of several segments of its audience, he insists.

There are also the “logged out” unique visitors to Twitter profile pages, as well as the tertiary ‘syndicated’ viewers who are exposed to tweets which are embedded on third-party websites.

On the earnings call, Mr. Costolo said:

“Twitter is everywhere. It’s all over TV. Those users come to Twitter looking for the content they’re told is happening and unfolding on Twitter right now, and obviously, from the numbers we’re seeing, lots of them decide not to log in.”

If you count all the viewers you get a number triple the MAU total of 271 million, Costolo emphasizes. “We will position ourselves to reach the largest audience in the world and every person on the planet,” he said.

Video – Twitter Q2 2014 results