The company's stock had fallen by almost 18% to $54.31 in
after-hours trading -- still more than double its $26 IPO price,
Advertising accounted for $220 million, or 90.6%, of revenue,
with the balance coming from data-licensing agreements. Mobile
accounted for 75% of ad revenue.
On the user growth side, Twitter reported having 241 million
monthly active users last quarter, up just slightly from the 232
million it had in the third quarter. Its U.S. growth was more
stagnant, up from 53 million to 54 million in the three-month
period. That's clearly problematic for Twitter, since 73% of its ad
revenue comes from the U.S.
Mr. Costolo described measures Twitter has taken and intends to
take to make the service more welcoming to new users and more
"indispensable" to existing ones.
For example, it introduced "media-forward timelines" in October,
which effectively made Twitter look more like Facebook by causing
photos and the first frame of Vine videos to display in users'
streams without requiring them to click a link open.
"By bringing the content of Twitter forward and pushing the
scaffolding of the language of Twitter to the background, we can
increase high-quality interactions and make it more likely that new
or casual users will find the service as indispensable as our
existing core users do," he said.
In an effort to make Twitter more conversational for a broader
swath of people, it also introduced in-line social actions in
October, letting users reply, retweet, or favorite tweets from
within the tweet itself.
Mr. Costolo said that those changes had already juiced
engagement last quarter, and favorites and retweets had gone up 35%
since they were instituted.
He also said that a simpler user onboarding process and native
mobile sign-up were in the works.
"It's important to realize, however, that it will be a
combination of changes introduced over the course of the year that
we believe will begin to change the slope of the growth curve," he
Another data point Twitter released -- total timeline views, or
the number of times users refreshed their Twitter streams -- was a
red flag that pointed to dwindling user engagement. It reported 148
billion timeline views, down from 159 billion in the previous
However, Mr. Costolo had an explanation, which was that users
are refreshing their streams less often because of product changes
-- such as the "in-line social interactions" among users who reply
to each other -- that are intended to increase engagement with
"[Threaded conversations offer] a better experience for existing
users and helps new users grasp the conversational nature of the
platform," he said.
Twitter's insertion of photos into users' streams has also been a
boon to its ad business. Chief financial officer Mike Gupta
reported that the number of total ad engagements -- including
favorites, retweets and replies -- were up 70% last quarter over
the previous one, driven by the introduction of media-forward timelines. For
advertisers, that change meant that they could effectively show
higher-impact display ads on Twitter by attaching photos to their
It's a key metric for Twitter, since the company charges
advertisers on a per-engagement basis, and they pay nothing for
The cost per engagement of ads in Twitter's auction-based system
was down 18% last quarter, however. But Mr. Gupta said that was
"more than offset" by the increase in engagements.