7 May

Twitter Makes Changes after Its Disappointing 1Q15 Earnings

WRITTEN BY Puneet Sikka

Twitter’s CFO will now take additional responsibilities

Twitter’s (TWTR) CFO, Anthony Noto, will now also head the company’s marketing department. According to a May 5 report from the Wall Street Journal, citing people familiar with the matter, Noto hired five new finance managers. Now, he will be equally involved with Twitter’s marketing team. The finance managers include hires from HP (HPQ) and Goldman Sachs (GS). Anthony Noto is an former Goldman Sachs banker. He replaced Mike Gupta as the CFO last year.

Twitter Makes Changes after Its Disappointing 1Q15 Earnings

These management changes came after Twitter’s disastrous 1Q15 earnings a few days ago. Twitter missed its own revenue growth estimate for 1Q15 and even lowered its outlook. Twitter’s stock is down 28% since the earnings were announced on April 28. A strong US dollar (UUP) impacted the whole tech sector. Twitter’s concerns were largely due to the low demand from advertisers for its direct response ads.

In particular, app install ads—one of the most important types of direct response ads—underperformed for Twitter. These are the ads that appear in Twitter’s news feed on the mobile platform. They encourage users to download certain apps directly from Apple’s (AAPL) App Store or Google (GOOG) Play.

Underperformance is concerning for investors

This revelation was concerning for investors because they expected this business to drive Twitter’s growth. In the past, Facebook (FB) openly revealed that its mobile app install ad business, which it calls “App Links technology,” has been an important growth driver for the company. Even Google is seizing this opportunity. Now, it’s enhancing its mobile ad network by indexing mobile apps just like its web content.

The research also indicates that the mobile app install ad market is poised for strong growth. According to a report from eMarketer, and as the above chart shows, it’s estimated that mobile app install ad spending in the US increased from $0.77 billion in 2013 to $1.67 billion in 2014. The growth could continue to expand rapidly this year as well if spending reaches an expected $3 billion.

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