Dick Costolo

Asa Mathat

Media


In the wake of a big Q2, Twitter had two messages for Wall Street today:

  • We’re going to get much much bigger, by taking advantage of an audience that’s much bigger than our user base.
  • But that’s not going to happen anytime soon! In the meantime, we’re going to make a lot of money from the 271 million users we have.

Is that confusing to you? Wall Street seems okay with it, for now: Twitter’s stock, which had shot up some 30 percent before the company’s earnings call today, remained at that level by the time Dick Costolo and his lieutenants were done talking.

Here’s their argument in a little more detail: Costolo told analysts that Twitter is really two to three times bigger than its 271 million users, because so many people come to Twitter.com but don’t log into the service, and so many people see tweets on TV and on other websites.

But Costolo also told analysts that Twitter doesn’t make any money from those extra users, and doesn’t plan on changing that anytime soon. The first job is to focus on its core user base — both in terms of keeping it happy and making money from it — and expanding that base as well.

Costolo also spent a lot of time talking about the World Cup, which was not a surprise. But again his messaging might seem mixed unless you were paying attention: Costolo said the company’s focus on promoting the soccer tournament was a big success in getting users to spend more time on the service — but that the games didn’t add more users.

Translation: Yes, big events are big for us — but no, we’re not dependent on them for growth. You don’t have to wait another four years for another good quarter from us.

Costolo also pointed to Twitter’s World Cup efforts — for instance, customized pages for the games and teams — as a clue about how it would make money from its more casual visitors down the road. And in the next breath, he made sure to explain that this wasn’t happening in the near term.

Our business is very big! And with some imagination, you can imagine it getting much, much bigger one day!

That’s a hard sell for lots of folks to make. But it looks like it’s working for Costolo today.

——————–

EARLIER

 

Turns out the old metrics Twitter was using to describe its size did just fine –at least for one quarter: Twitter’s Q2 beat Wall Street expectations for revenue, earnings and use growth, and the stock is flying.

Now it’s time for CEO Dick Costolo to convince investors that this wasn’t a one-time affair. We’ll be covering his earnings call live, below:

Peter Kafka July 29, 20142:00 pm

Greetings from SFO! My flight was fine, thanks very much*.

Peter Kafka July 29, 20142:00 pm

*(Requisite first-world problem grumbling about GoGo wifi).

Peter Kafka July 29, 20142:01 pm

Call starting now.

Peter Kafka July 29, 20142:02 pm

On the call: Dick Costolo, Mike Gupta, who is still CFO, and Anthony Noto, who is going to take Gupta’s job any minute.

Peter Kafka July 29, 20142:03 pm

Said this on the Twitter, but I’ll point out again: Last quarter Wall Street was dismayed that Twitter’s user numbers only grew by 25 percent. This quarter, they grew 24 percent, and the Street is ecstatic.

Peter Kafka July 29, 20142:04 pm

Costolo, reading. I’ll skip most of this since it’s in the release.

Peter Kafka July 29, 20142:04 pm

Ad growth “primarily” driven by higher engagement.

Peter Kafka July 29, 20142:04 pm

Costolo wants to talk about “progress we’re making on our consumer product.”

Peter Kafka July 29, 20142:05 pm

Kicks off with World Cup push. Thinks it is a template for organizing user experience around “topics and live events”. Translation: Lots more of World Cup-style pushes.

Peter Kafka July 29, 20142:06 pm

Talking about reach beyond Twitter’s properties: Two billion impressions during German World Cup game, in addition to four billion on Twitter properties.

Peter Kafka July 29, 20142:08 pm

“Hundreds of millions” of people who are coming to Twitter each month but not logging in. Says those users, plus people seeing tweets off of Twitter, is 2x-3x total size of Twitter’s 271 million users. “Make no mistake, our total audience and reach represent a significant opportunity.”

Peter Kafka July 29, 20142:09 pm

Gupta will handle Q2 numbers. Again, we’ll skip most of this.

Peter Kafka July 29, 20142:10 pm

While he is talking, let’s go back to Costolo’s 2x-3x comment. That’s deliberately vague — as we reported last night, if Twitter is going to roll out new metrics to describe its size, it’s not happening today. But it gives you a sense of where they are going.

Peter Kafka July 29, 20142:10 pm

But, also: Wall Street, and advertisers, need to decide how much credit to give Twitter for those users. After all, it knows very little about them compared to its active, logged-in users.

Peter Kafka July 29, 20142:13 pm

U.S. users now total 60 million. 

Peter Kafka July 29, 20142:14 pm

Decline in y/y MAU growth rate will continue to slow.

Peter Kafka July 29, 20142:15 pm

“We see no reason” why we can’t make as much money per user as “our industry peers” over time. Hear that, Facebook?

Peter Kafka July 29, 20142:16 pm

Gupta says goodbye, though he’s staying on to do M&A.

Peter Kafka July 29, 20142:16 pm

Here’s Noto. Nice timing, Anthony!

Peter Kafka July 29, 20142:17 pm

Talking up new ad products (Not on the call: Ad boss Adam Bain, who is running a big Twitter sales event this week)

Peter Kafka July 29, 20142:18 pm

Going through increased guidance. Twitter now expecting a $1.3+ billion 2014.

Peter Kafka July 29, 20142:18 pm

OK: Q&A, from analysts, and also from Twitter.

Peter Kafka July 29, 20142:19 pm

Analyst: You talked about “off network” growth. What would those impressions mean in terms of, you know, money?

Peter Kafka July 29, 20142:20 pm

Also, for Noto: You’re a stud: Goldman, NFL, you’re awesome. Talk about how big a media biz Twitter can be – as opposed to being a social network.

Peter Kafka July 29, 20142:21 pm

Costolo: “We see that as a big opportunity, obviously.” We’ve made changes to profile pages, and that “has led us to be excited about other experiments that we’ll be running” for those audiences. As far as revenue? “We’re not monetizing those audiences.”

Peter Kafka July 29, 20142:22 pm

Noto: We’re a technology company. (Don’t give us a media company multiple for chrissakes!)

Peter Kafka July 29, 20142:23 pm

Noto: Twitter isn’t going to disrupt other companies – it’s going to make them better. (Hey, TV guys! I know it looks like we’re competing with you now, and much more in the future, but don’t worry! Also, give us your money!)

Peter Kafka July 29, 20142:24 pm

Analyst: Please talk about “trajectory” of MAUs last three months. Also, how do you keep new users who came in from World Cup?

Peter Kafka July 29, 20142:25 pm

Noto or Gupta (sorry): Not talking about trajectory. But, crucially – we don’t think World Cup drove new users. (This makes sense, actually — if you weren’t using Twitter before the World Cup, why start then?)

Peter Kafka July 29, 20142:26 pm

Same question on World Cup users, and what’s up with that “buy” button: Costolo repeats — World Cup increased engagement, not new users. Product changes added new users.

Peter Kafka July 29, 20142:27 pm

Analyst: Hey, you have a newish product guy. When can we see what he’s been up to?

Peter Kafka July 29, 20142:28 pm

Costolo: Product road map we talked about earlier is still in place.  World Cup was awesome. Time to remind you we are working on messaging, just like Facebook, Instagram, Snapchat, WhatsApp, etc.

Peter Kafka July 29, 20142:29 pm

Analyst: Back to the non-logged-in people. What can you show them? 

Peter Kafka July 29, 20142:29 pm

Costolo: Did I tell you how much I liked the World Cup?

Peter Kafka July 29, 20142:30 pm

Also, we need to make sure new users get value out of Twitter right away. Big focus.

Peter Kafka July 29, 20142:30 pm

Analyst: How do you get to 100M+ U.S. users?

Peter Kafka July 29, 20142:31 pm

Costolo: Again, need to deliver “immediate value” to new users once they sign up. “And no, the product does not need to radically change” to make that happen.

Peter Kafka July 29, 20142:32 pm

New Q: Are new users less engaged than older users? (Btw, this is one of the arguments of Twitter bears)

Peter Kafka July 29, 20142:32 pm

Gupta or Noto (sorry): We’re changing product to make it easier for new users.

Peter Kafka July 29, 20142:33 pm

Analyst: Another Q about newish users being less active – is that true, and are they less valuable to advertisers?

Peter Kafka July 29, 20142:34 pm

Costolo: Not talking about third-party data or “rumors” from them. But majority of our users are “content creators.” Wonder how he is defining content creator. Hunch he includes retweets.

Peter Kafka July 29, 20142:34 pm

Analyst: Ad loads. Can you make them bigger? (i.e. will you show people more ads?)

Peter Kafka July 29, 20142:35 pm

Noto: Ad load low, and small compared to peers. “Significant upside” w/r/t to ad load. (You bet we’re going to show people more ads!)

Peter Kafka July 29, 20142:37 pm

[Apologies, missed last exchange]

Peter Kafka July 29, 20142:37 pm

Analyst (with bad phone) wants to know about margins, costs.

Peter Kafka July 29, 20142:38 pm

Gupta: Yep, we spent some money to make sure we could scale. Noto: On guidance – we balance opportunity vs. risk so (doubtful anyone reading this cares about this answer).

Peter Kafka July 29, 20142:39 pm

Analyst: More on the logged-in users – why do all of those people come to Twitter.com and not log in? Also, can you talk about MoPub?

Peter Kafka July 29, 20142:41 pm

Costolo: “Twitter is everywhere” — it’s all over TV. ESPN totally uses it. World Cup! And sad things like plane crashes.

So that brings a lot of attention to the site. People come from TV, etc., look around, and then they don’t log in. We’re providing “limited content” to those people, and “we see an opportunity — a big opportunity” to change that.

Peter Kafka July 29, 20142:42 pm

MoPub: Mobile! Programmatic! It’s great! (Also allows us to sell ads outside of Twitter, to people who aren’t looking at tweets at all. So that’s good.)

Peter Kafka July 29, 20142:43 pm

Analyst: Q about 14 percent of users who may show up as a result of “automated activity.” What’s up with that? Also, how much better can user experience get?

Peter Kafka July 29, 20142:44 pm

Costolo: “To be perfectly frank, we think it can get a lot better.” Better surfacing of stuff, finding stuff you missed in the stream, making it better for new users. But also “even for our core users” we can improve.

Peter Kafka July 29, 20142:46 pm

Analyst: U.S. and U.K. are important. But what about other markets. Rank them! Also, how much ad revenue comes from self-service?

Peter Kafka July 29, 20142:46 pm

Gupta or Noto: U.S., U.K. and Japan most important. Not talking about self-service. (Once it gets really big, you bet they’ll talk about it.)

Peter Kafka July 29, 20142:47 pm

Analyst: Can you talk about the Amazon cart test you started?

Peter Kafka July 29, 20142:47 pm

Costolo: It’s a test.

Peter Kafka July 29, 20142:48 pm

Analyst: Facebook said it’s going to focus more on “key public entities.” What do you think about that? Also, boring guidance question.

Peter Kafka July 29, 20142:49 pm

Costolo: “We love the relationships we have” with famous people and with content producers and broadcasters that work with them. So we’re cool. (Have fun playing catch-up, Facebook! But also we don’t want to piss the TV guys off while we are fighting with you).

Peter Kafka July 29, 20142:50 pm

Noto: Yep, we’re thinking about new metrics.

Peter Kafka July 29, 20142:50 pm

Q from an actual non-analyst Twitter user: Talk about developers, please.

Peter Kafka July 29, 20142:51 pm

Costolo: Crashlytics is cool.

Peter Kafka July 29, 20142:51 pm

Analyst: Can you build a reliable interest graph for non-logged in users? If not, aren’t they worth much less than logged-in users? (Good question!)

Peter Kafka July 29, 20142:52 pm

Costolo: We can get “tremendous signal” about people who visit us. Could have come with search intent. We can see what they’re looking at, “at what they’ve come to Twitter to consume” – so long-term, we think we can work on that. But again, that’s a long-term thing.

Peter Kafka July 29, 20142:53 pm

(Note Costolo didn’t say “World Cup” in this case. But that’s what he meant.)

Peter Kafka July 29, 20142:54 pm

Analyst: You said you could close monetization gap with Facebook, etc. How can that happen?

Peter Kafka July 29, 20142:55 pm

Gupta or Noto (sorry): More ads! Remember what we said about ad load. Also, improved click-through rate, which is about targeting ads better, and making ads that work better. Also price: As we get bigger, and can make better ads, ROI will go up, and advertiser demand will increase.

Peter Kafka July 29, 20142:56 pm

Analyst: What’s happened to user trends after the World Cup?

Peter Kafka July 29, 20142:56 pm

Gupta or Noto: Not talking about user trends.

Peter Kafka July 29, 20142:57 pm

Last Q: More about the automated user/impression you talked about. Also, how are you thinking about people who have multiple accounts?

Peter Kafka July 29, 20142:59 pm

Gupta: Again – that automated # isn’t getting any bigger. Also we’re a little fuzzy about it. As far as multiple accounts – it exists but (didn’t hear). 

Peter Kafka July 29, 20142:59 pm

Call’s over! Looks like a lovely day in S.F. Looking forward to getting outside. Thanks for reading.




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