Twitter’s Revenue Growth Dwindles in Second Quarter

Livestreaming is seen as one bright area

Twitter reported better-than-expected financial results on Tuesday, beating Wall Street's earnings expectations while falling short on total revenue.

According to its second-quarter earnings, Twitter's revenue totaled $602 million—a 20 percent increased year-over-year—but missed expectations of $607 million. Earnings per share were $.13, higher than the $.10 expected.

Twitter's monthly user base is also growing slowly but steadily, increasing by 3 million over the past three months to total 313 million. Mobile users now account for 82 percent of total users, down one percentage point from first-quarter 2016.

In a letter to shareholders, the company said growth in the second quarter was driven by marketing initiatives, organic growth and product improvements focused on making tweets relevant through a partial algorithm in the timeline and push notifications.

"We've made a lot of progress on our priorities this quarter," Twitter CEO Jack Dorsey said in a statement. "We are confident in our product roadmap, and we are seeing the direct benefit of our recent product changes in increased engagement and usage. We remain focused on improving our service to make it fast, simple and easy to use, like the ability to watch live-streaming video events unfold and the commentary around them."

Advertising revenue grew 18 percent to $535 million, with mobile now accounting for 89 percent of total ad revenue. International ad revenue grew at a much faster pace than U.S. ad revenue, growing 33 percent year-over-year and totaling $241 million. In the U.S. ad revenue increased by 12 percent year over year to total $361 million. Data licensing and other revenue made up another $67 million. 

Ad engagements also grew—increasing 226 percent year-over-year—while the average cost per engagement declined 64 percent year-over-year, primarily because of the company's shift to auto-play video.

While Twitter has struggled to grow fast enough to please Wall Street, this summer has been a bit brighter. The microblogging platform has announced a number of new deals to livestream sports, news and talk shows, which partners and advertisers seem to be excited about. While it's too early to tell how much the burgeoning area will be for the company, it's clearly a point of focus.

"Livestreaming video instantly shows the value and power of Twitter and we're continuing to execute on the strategy we outlined in Q1," according to the shareholder letter. "Our two main initiatives in this area—Periscope, and our new Twitter live-streaming video experience—are showing great promise."

Twitter also continues to refine and redefine its brand to better help users and would-be users understand why the company is the place to go for news and discussion related to what's happening around the world. On Monday, it unveiled a brand refresh along with several new ads, which CMO Leslie Berland said helps explain why Twitter is a "window into what's happening in the world."