Is Twitter Out Of Hot Water?

Twitter (NYSE: TWTR) has, for the first time in its history, reported a GAAP profit. Has it finally figured out how to leverage social media to deliver a profitable and growing business venture? Have all its troubles ended? 

Twitter’s Financials

For the fourth quarter of the year, Twitter’s revenues grew 2% over the year to $732 million, beating the Street’s forecast of $686.1 million. GAAP net income was $91 million, or $0.12 per diluted share. Non-GAAP net income was $141 million, or $0.19 per diluted share, ahead of the market’s projected earnings of $0.14 per share.

By segment, Data licensing and other revenue grew 10% to $87 million. Advertising revenue was $644 million, up from $638 million last year. By ad format, video was the largest, driven by strength in Video Website Cards, Video App Cards, In-Stream Sponsorships, and In-Stream Video Ads. Other ad formats such as DR website clicks and Mobile App installs also performed well.

US revenue declined 8% to $406 million and international revenue grew 17% to $326 million. Japan grew 34% year-over-year and accounted for 15% of total revenue or $106 million.

Total advertising engagements were up 75%. Cost per engagement (CPE) was down 42% y-o-y, which was a more moderate decline compared to declines of 63%, 53% and 54% in the first three quarters of the year due to stabilizing video prices and stronger demand.

Total GAAP expenses declined 28% to $621 million with traffic acquisition costs amounting to $20 million, down 55%. Twitter’s first profitable quarter is mainly due to its focus on cutting costs and attracting advertising revenue through live video.

Average monthly active usage (MAU) was 330 million, up 4% but flat compared to third quarter and below analyst estimate of 333 million. Daily active usage grew 12%. MAU was impacted by seasonality and the change to Safari’s third-party app integration as well as increased information quality efforts to reduce malicious activity and fake accounts.

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Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual incubator that aims to help one million entrepreneurs ...

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