Twitter: early bird

For companies wanting instant feedback to their earnings, reporting after the market close is not ideal since it will be nearly 18 hours until their shares officially begin trading (notwithstanding the erratic after-market). Twitter, at least accidentally, found a solution to the agony of waiting. Unfortunately, for the social network, the instant feedback it got on its first-quarter results was not pretty as its shares tumbled nearly a fifth, or $6bn in lost value, in the closing minutes of official trading.

Thirty minutes before the US markets were set to close on Tuesday, Twitter's earnings inadvertently leaked on (where else?) Twitter. A data-gathering firm called Selerity found the release posted early on Twitter's website and tweeted it out. And what was a bizzare story turned ugly. The micro-blogging site's revenue of $436m missed its own revenue guidance of $440m to $450m. More ominously, it brought down its revenue forecast for all of 2015 by a few percentage point to just over $2bn.

The culprit that Twitter cited for both its soft revenue results and projections was its limited success so far for "direct response" products which allow users to connect easily with advertisers (e.g. just click on an ad in a Twitter feed to reach a product being marketed).

Twitter did manage to post an Ebitda margin of 24 per cent, beating expectations (on its adjusted measure that excludes stock pay). Monthly average users inched up 5 per cent to just above 300m. And a weak quarter did not prevent it from announcing two deals to further improve its appeal to advertisers. One is an acquisition of an internet retail marketing start-up called TellApart. The other was a potentially promising partnership with Google's ad network, DoubleClick.

So far this year, Twitter shares were up 40 per cent. CEO Dick Costolo had spent much of 2014 reorgansing his management team to boost Twitter's credibility, especially compared to its respected rival Facebook. In just a few moments on Tuesday afternoon those efforts took a big step backwards.

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