News from Twitter's (TWTR) second earnings report as a public company has been met with mixed results from investors. Sales doubled to $250.5 million year over year, more than Wall Street analysts expected. Twitter continues to lose money, incurring a 22 cent loss per share.
Despite the increase in ad sales, Twitter (TWTR) reported a reduction in engagement metrics. Twitter reported 255 million monthly active users for Q1 2014, a 5.8% increase over last quarter. This falls slightly below analysts’ expectations. Wall Street analysts remained worried about Twitter's slow growth because such a large percentage of revenue comes from ad sales. On the earnings call Twitter CEO Dick Costolo was positive about engagement in Q1. Favorites and retweets were up 26% in the quarter. A sign, Costolo says, people are getting more use out of Twitter.
Even with the higher than expected sales revenue, Twitter investors have reason to worry. There is a growing concern among content producers that social engagement on Twitter and Facebook is not as effective as they had thought. In January, Upworthy.com announced they would no longer be using social engagement and page views to measure success. Tony Haile, the CEO of real time traffic tool ChartBeats, has said that they see no correlation between social engagement and web traffic.
As websites and advertisers begin to see that social engagement and page views do not increase revenue, Twitter, Facebook (FB), Linkedin (LNKD) and Yelp (YELP) will have an even harder time selling ad revenue.
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