Tech

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Station Digital Corporation is a multimedia digital broadcast company that offers free music streaming for millions of songs. Station Digital Corporation features both genre-based and artist-based music discovery stations to suit an endless variety of musical tastes, and a personal recommendation service to its more than three million users – all available both online and through its iOS and Android mobile apps.

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(NYSE: TWTR) reported Q4 earnings on Thursday. While the company beat analyst expectations, it fell way short on new user activations. The social network had 288 million monthly active users in the quarter, compared to some analyst estimates for 290 million or more. That means Twitter added just four million users during the quarter, or small increase of 1.4% from the previous quarter, its slowest user growth rate to date.

twitter users q4

Twitter’s executives tried the blame game and pin the sluggish growth on an “BUG” in Apple’s iOS 8 update, which is said to have cost Twitter four million users during the quarter. CEO Dick Costolo said the company moved quickly to fix the issue, but it “wasn’t a one size fits all fix.”

It’s hard to value the loss of 4 million new users and it likely would not have made a huge impact on revenue. Still adding in the 4 million lost users due to the claimed “BUG” it would have brought new users for the quarter to 13 million still way short of the 16 million new users added in the previous quarters.

More important than user growth, however, is Twitter’s ability to make money on its users (logged-in or not, on its app or a third party’s). To that end, Twitter’s financial performance was outstanding.

Earnings were double expectations, coming in at $0.12 per share versus expectations of $0.06. Revenue came in at $479 million compared to expectations of $453.1 million.

twitter-revenue-q4

Growing EBITDA

One of the most surprising metrics from Twitter’s fourth-quarter earnings report is the 12-percentage-point increase year over year in EBITDA margin. The company generated $141 million in adjusted EBITDA for the quarter, representing 30% of total revenue. This factor is largely responsible for the significant earnings beat the company posted.

While Twitter typically sees higher than average EBITDA margins in the fourth quarter due to higher ad demand, it expects the trend to continue into 2015. For the first quarter, Twitter guided for revenue of $440 million to $450 million (slightly below analysts’ expectations) and EBITDA of $89 million to $94 million.

Investors should pay close attention to EBITDA margin. The Growing EBITDA margin is a sign that Twitter is generating more revenue than it can invest in its business. Outperming in revenue compared to expectations is the likely reason why EBITDA margin expanded so much. It’s also the reason we’ll like see continued partnerships grow in the near future.

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Well it’s official Twitter is partners with Google again. It was confirmed on Thursdays earnings call with CEO Dick Costolo. Although Costolo did not go into the details of the partnership there’s a lot of speculation on how Twitter is going to benefit from the deal.

Costolo mentioned on the call “The way we think about the Google deal is distinct, it’s all about the eyeballs.” It could be several months before we start seeing Twitter feeds in Google search results but none the less this will add a dynamic to real time content advertising opportunities for both Google and Twitter.

The Google partnership is without a doubt a major milestone in accomplishing it’s strategy that was rolled out last year by their CFO Anthony Noto where he outlined Twitter striving to be one of the op revenue generating internet properties in the world.

It’s a monumental climb from their current $1.4 billion revenue number to the projected $24 billion by the fiscal year ending in 2024. Their strategy has to change and the Google deal is the first step.

Growing it’s daily users and creating a platform to monetize different advertising products capitalizing on real time content. Which is no surprise to the news Twitter released prior to the earnings call which announced a deal with Yahoo Japan and Flipboard where you will see Twitter ads like “promoted tweets” pop up on both services. The Google partnership followed a day later.

We’re not sure of the full details of this deal but our sources say it’s likely a licensing agreement that gives Twitter revenue, and of course alot of traffic. And for Google, it gives them highly valuable time-sensitive content they can serve super relevant ads in real time.

There’s no doubt data has to be exchanged between these two companies. So it’s very likely tweets will show up in Google searches again — a big deal given Google still commands 75% of the web search market and remains the number one most-trafficked website globally.

So we’ll have to see how this partnership plays out and see if it lasts longer than a couple of years this time.