Why Twitter finally caved and returned to Google

Following the release of its fourth-quarter earnings results, Twitter CEO Dick Costolo confirmed the company’s previously rumored new partnership with Google. Twitter had partnered with Google before to surface tweets in search results, but in 2011 it chose not to renew their deal because the terms weren’t favorable enough for the social media company. So why now, years later?

Costolo explained his thought process during a conference call following Twitter’s fourth-quarter results.. Since growth of monthly active users of Twitter is slowing, the company is starting to double down on measuring its impact outside of the core Twitter experience. It’s pushing new metrics, like logged-out users and syndicated views (when Twitter shows up places like Flipboard or CNN).

As a result, the time is ripe for a partnership with Google, which could be one more place to serve up tweets outside Twitter. “We’ve got the ability to drive attention and aggregate eyeballs to logged out topics and events,” Costolo said. “That’s one of the reasons it makes a lot more sense for us now.”

He didn’t go into any of the business deals of the agreement, and he said we shouldn’t expect to see the partnership come to fruition for a few months. In other words, it’s not going to impact Twitter’s bottom line during its next earnings call.

The other key point discussed in Twitter’s earnings call is, as I pointed out earlier, strong revenue and nearly flat growth in the fourth quarter. People considered what that meant for Twitter’s business model on (where else) Twitter.

Josh Elman, a Greylock investor and former Twitter employee, pointed out that growth, slow or fast, is a “lagging indicator of prior work.” Gigaom founder Om Malik said the trends show that although Twitter is a business force to be reckoned with, it now seems unlikely to ever become a huge powerhouse like Facebook. Farhad Manjoo at The New York Times agreed.

There was one other interesting item from the earnings call: Twitter CEO Dick Costolo blamed a mysterious iOS 8 bug and seasonality, saying that the fourth quarter is always Twitter’s slowest in terms of user growth. When asked to elaborate on the bug, he dodged the question.

“It’s an unforeseen bug as it relates to twitter integration,” Costolo told investors. “Once we understood the issue we moved as quickly as we could to minimize the impact on multiple fronts. The problem was complex and affected different users differently.”

He said based on January’s numbers, he believes Twitter’s MAU numbers will return to their former growth rate by the next earnings call.

Twitter beats on earnings but misses on user growth

Twitter’s stock rose slightly today after the company announced its fourth quarter earnings. It beat by a significant amount, although it missed in terms of what analysts expected for user growth.

Here are the numbers:

Revenue:

Analysts expected — $453.1 million

Twitter actual — $479.08 million

Earnings per share (Non-GAAP):

Analysts expected — $0.06

Twitter actual — $0.12

MAUs:

Analysts expected — 295 million

Twitter actual — 288 million

Twitter’s growth is slowing. It only grew 1.4 percent from the third quarter to the fourth quarter, which is its slowest user growth quarter-over-quarter in the history of it being a public company.

The mixed bag of earnings results come after a month straight of Twitter developments. The company executed on some of the new products it previewed during Analyst Day in November: Instant, algorithmically curated timelines for new users, group private messaging, and “while you were away” updates. It made small forays into expanding its advertising beyond Twitter itself. Promoted tweets will start appearing on Flipboard and Yahoo Japan, the first partners.

At the same time, investors started raising complaints about the slow user growth. One told Business Insider that Dick Costolo should resign. A CNBC analyst predicted he’d be out by the end of 2015. Twitter co-founder Jack Dorsey recently tweet stormed in support of Costolo.

There’s also been a lot of leaked Twitter news recently that’s not product related. The company recently removed employees’ access to the monthly active user number, only granting it to certain people now. In an internal Twitter forum, CEO Dick Costolo admitted that Twitter wasn’t good at handling user harassment and bullying issues, and that he takes total blame for it. And word got out that Twitter is reestablishing its partnership with Google, so you’ll start seeing more tweets in your Google searches.

 

This story is developing and we’ll update with more information from the earnings call….

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Twitter left a lot unanswered with new ad strategy, but Wall Street didn’t mind

Twitter left a lot of questions unanswered about its new syndicated ad network, but it looks like Wall Street didn’t mind. The social company’s stock closed up six percent after it announced it would start powering promoted tweets on other sites. The tweets would look a lot like they do in Twitter.

A mockup of a promoted tweet that could appear outside Twitter

A mockup of a promoted tweet that could appear outside Twitter

It’s sort of a confusing premise, one that led Re/Code to call it a “concept” rather than a “full-blown product.” Would promoted tweets appear on the sidebars of websites? Would they pop up embedded in posts? Would they only show up in widgets that serve up a bunch of tweets? Twitter’s blog post on the news didn’t elaborate further, aside from saying they’d appear on Twitter’s first partners: Flipboard and eventually Yahoo Japan.

Flipboard is an obvious integration, since tweets are already part of the content. Flipping past a promoted tweet as you go through stories would feel natural. “Because Flipboard already integrates organic Tweets into the app, the Promoted Tweet will have the same look and feel that is native to the Flipboard experience,” the Twitter post said.

I was struggling to think of many other examples where there are streams of tweets on other websites. Most media companies embed or show one-off tweets, so a promoted tweet there would look jarring and might keep journalists in particular from embedding tweets. A few years ago, embedded widgets showing latest tweets by certain users were very popular, but I haven’t seen those in awhile. I asked Twitter for more examples of where they imagine these promoted tweets appearing, and I’ll update this if I hear back.

On the surface, Yahoo Japan is a weirder partner choice than Flipboard. Why would Twitter want to work with an Asian arm of a struggling media brand?

Turns out, Yahoo Japan is its own separate entity — the American Yahoo helped found it in conjunction with telecommunications company SoftBank. Yahoo Japan’s popularity has continued to soar even as Yahoo’s has plummeted. And Twitter is hugely popular in Japan as well. It’s an easy way to test the product before courting other companies.

A source familiar with the Twitter’s strategy told me they’re still developing this new promoted tweet strategy and will be releasing more information in the future. The person I spoke with said that we can expect to see promoted tweets both in feeds of tweets from the website, but also as standalone units. “The promoted tweet is a trusted and known unit and it looks and feel really easily digestible,” they said. “You need users to say, ‘This is content I’m ok with having here.'”

That’s key for Twitter’s new external ad strategy to succeed. Given the fact that the company is serving up promoted tweets, not newly designed ads, it has to hope people like that format.

The world is looking rosy for Facebook as its stock hits a record high

During Facebook’s earnings call yesterday it seemed like things couldn’t get any better for the company, with both revenue and engagement growing rapidly. But this morning, the company one upped itself again, hitting the highest stock price on record since going public.

Twitter stock slides in pre-market trading

Despite the good news in Twitter’s (s twtr) first quarterly earnings report as a publicly traded company — particularly stronger-than-expected revenue of $243 million and $0.02 earnings per share — the stock was down more than 20 percent in pre-market trading. Just before trading opened, the stock was at $51.40, more than 22 percent below its closing price of $65.97. The reason for the slide seems to be the company’s slow user growth in 2013: an increase of just 30 percent year-over-year. Pre-market shares tend to be more volatile than after the opening bell, but it’s still not looking very pretty.