On Thursday, Twitter (NYSE:TWTR) reported solid fourth-quarter results, beating analyst expectations for revenue and EPS. In addition to Twitter's surprising financial success during the quarter, ensuing media coverage of the report has mostly focused on the company's slower-than-expected user growth. But beyond these closely followed storylines are two just-as-telling insights investors should be careful not to overlook.
After Twitter CEO Dick Costolo talked in November at its Analyst Day about some new features the company was planning to roll out, the company has been delivering. "So, as I've highlighted on this call, we've launched or have public experiments out for nearly all of the new features we talked about at our Analyst Day," Costolo said during the fourth-quarter earnings call.
Topping off a number of new features since Twitter last reported earnings, in the weeks leading up to Twitter's Q4 release, the company announced the ability for users to share 30-second video clips and group messaging, and it began testing "instant timelines," a feature that instantly gives new users content without having to manually follow users themselves.
New! Use Direct Messages to speak privately with a group of up to 20 people. Share Tweets, show emoji & be yourself. https://t.co/8giGhC6OO0— Twitter (@twitter) January 27, 2015
The New York Times' author Vindu Goel explained Twitter's instant timeline feature earlier this month.
Twitter analyzes your contacts and uses information like who they are and who they follow on Twitter to guess which accounts and topics might interest you. It then shows you those tweets in your feed. So if your friends are foodies, you will see items about recipes and food trends. If they are football lovers or fans of Ellen DeGeneres, you will see National Football League video highlights and tweets from comic actors.
Instant timelines mark an important effort by Twitter to find a way to resonate with new users and hopefully keep more of them from jumping ship. The feature, of course, requires user permission to analyze contact info.
As Twitter's user growth rate faces challenges, investors will look to new features for more promise that the social company can continue to give its members ways to become increasingly engaged and spend more time on its service.
A Google deal
Costolo confirmed during the earnings call that the company has a deal with Google that will drive traffic to its site, providing a "logged-out experience." The deal will give the search giant access to Twitter's "firehose" of billions of tweets, bringing Twitter content to search results in real-time, according to WSJ author Yoree Koh.
The deal with Google is one among a slew of other third-party deals Twitter has made recently for logged-out experiences, including deals with Yahoo Japan and Flipboard. While it could take time for these deals to pay off for Twitter meaningfully, the development of Twitter's logged-out reach could prove to be a key catalyst for growth in the long run.
Investors have good reason to believe Twitter's efforts to boost engagement with new features and logged-out content will eventually pay off. One area in which Twitter continues to over deliver is monetization. This is best represented by the all-important advertising revenue per thousand timeline views metric, or Ad ARPU. In Q4, Ad ARPU was up a whopping 60% from the year-ago quarter, playing a crucial role in Twitter's 97% year-over-year revenue growth.
In 2015, new features and third-party relationships will likely play a key role in further engagement, monetization, and maybe even a bit of user growth.