Consensus for Twitter's MAUs was so negative, especially after the company finished last quarter with 255 million MAUs, that any print over 267 million was enough to send shares soaring, especially when you factor in that Twitter is a profitable business, albeit on a non-GAAP basis (love those tech companies!).
"The key metric for the quarter-user growth-was stronger than published sell-side estimates and we believe much stronger than subdued buy-side expectations," wrote Sterne Agee analyst Arvind Bhatia in a research note.
Bhatia, who rates Twitter "neutral," believed that the sell-side was expecting 12 million MAUs and the buy side was even lower, at 10 million. The 16 million MAU add was the highest in five quarters. Twitter has made recent product changes, including making signing up easier, reducing steps, making it more visually appealing by embedding photos and others, and it's clear these changes are working, at least for the for time being.
The company clearly benefited from the World Cup (an event that only happens once every four years), though CEO Dick Costolo attributed the user growth more towards the product changes than the actual event. The question surrounding Twitter has never been about profitability (it earned an adjusted 2 cents per share on $312 million in the second quarter), it's always been about whether it's a mainstream product.
"Twitter is everywhere," Costolo said on the earnings call. "It's all over TV. When the NBA commissioner gets on TV and talks about sanctions about Donald Sterling, there are tweets all over the screen. This is all happening on twitter."
Costolo noted that Twitter's reach (MAUs plus unique logged out visitors) is two to three times what its monthly MAU number is, but the company is really only monetizing its MAUs, those Costolo hinted that would be coming down the line. For now, investors are happy to see that although Twitter may never be as big as Facebook (FB) users base is, it's not as small as they feared either.
-- Written by Chris Ciaccia in New York
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