Financial News

  • 7 February 2014, 17:41

Twitter Shares Plummet 23% On Market Opening

Twitter has lost almost a quarter of its value after shares plummeted on the market opening in New York.

Just under 5bn was wiped within minutes of trades commencing. Its share price later eased before closing 15.9% down.

The dramatic morning loss comes after investors sold shares over fears of its long-term profit making ability.

Late on Thursday it revealed a full-year 2013 loss of $645m (395m), and shares dipped 17% in after-hours trades.

The flight to safety comes as it revealed a marked slowdown in new users compared to recent years.

Investors seem concerned that the average number of monthly users had climbed just 3.8% from the September quarter to 241 million, reaching a potential plateau.

In its dominant home market, the company barely added 1 million new users.

The company also reported a dramatic decline in timeline views, which is seen as a measure of user engagement.

The sell-off continues despite results showing revenues in the quarter - the first as a public company - ending December 31 doubled to a better-than-expected $242.6m (148.7m).

Twitter's worth has been calculated on the basis that it can expand mass market appeal and gain penetration comparable to rival Facebook.

However Facebook has five times as many active monthly users.

Twitter's total revenue for last year was $665m (407m), up 110% on the $316m (194m) of 2012.

In comparison, Facebook saw revenue growth of 55% to $7.8bn (4.8bn) as it pushed ahead with mobile advertising.

In December, 77% of Facebook's users accessed its services through mobile devices - up from 64% in 2012.

Twitter's mobile access rate was 76%, up from 72% in 2012.

The average revenue per active user for Facebook is $8.33 (5.11) for 2013, increase of 11% from $7.49 in 2012.

Twitter only generated $3.61 (2.21) - less than half - from each active monthly user in 2013, although that was an increase of 53% year-on-year.

The micro-blog site has been searching for a number of key advertising staff to improve its UK and Europe operations, which has its headquarters in Dublin.

It has tried to target the top 100 UK advertisers and sought to creative a narrative for ad agencies and marketers that puts Twitter in a central role for ad campaigns.

Part of its 2013 UK growth strategy involved creating a "media partnerships" team in London specifically tasked with cultivating wider use of Twitter by celebrities such as "athletes, actors, comedians, musicians etc".

Chief executive Dick Costolo downplayed the investor fears for the seven-year-old firm and said the site would only get better.

He admitted the interface for new users was confusing, it needed to make more usage of videos and photos, and 'crosstalk' needed to be expanded.

Mr Costolo repeatedly said topic-based searches rather than hashtags, lists or following people, needed to be improved to make it easier for users to find content they were interested in.

"We know from our research that these are the kinds of things that cause users to become more engaged and to stick with the product, Mr Costolo said.

"We don't need to change anything about the characteristics of our platform. We just need to make Twitter a better Twitter."

In 2013 it said the UK was its biggest market outside America, with 15 million users (6.25%).

Facebook is far less reliant on the domestic US for its ad revenue, according to eMarketer, as 89% of its users are located in other countries.

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