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Twitter shares take off after company explains away low user growth

Aaron Pressman
This article was originally published on Vulcan Post. Twitter CEO Dick Costolo has basically said that Twitter has been slow to react to online trolls, and takes personal responsibility for it. According to two memos written by Costolo (via The Verge), the CEO feels “ashamed” about the way that trolls and harassers on Twitter have been [...] The post We Suck At Dealing With Trolls And It’s My Fault, Says Twitter CEO appeared first on Vulcan Post.

Twitter (TWTR) delivered what investors wanted to see in its fourth-quarter results, at least after a confused knee-jerk reaction. Once the company clarified its new user figures, the shares shot up as much as 12% in after-hours trading.

The popular social network said its revenue totaled $479 million in the fourth quarter, just about double sales from a year earlier and 6% more than the $454 million million Wall Street expected, according to FactSet. Adjusted earnings per share of 6 cents were double what Wall Street expected as well.

But initially, Twitter shares lost ground in after-hours trading. Investors focused on the 288 million average monthly active users at the end of 2014 — up only 4 million, or 1%, from the end of the previous quarter. That further fueled the doubts about user growth that have plagued Twitter, and its stock price, for much of the past year.

CEO Dick Costolo and team had a ready explanation and some better news. Apple’s (AAPL) iOS 8 software upgrade, which arrived at the beginning of the quarter, had an “unforeseen bug,” Costolo said, which caused the loss of 4 million active users. Absent that bug, Twitter would have come in with 292 million users.

Twitter didn’t explain the bug in detail and Apple did not respond immediately to a request for comment.

Costolo further assuaged doubts by adding that trends in January were already much better. As a result, Twitter expected to add about as many new users in the first quarter of 2015 as it had in each of the first three quarters of 2014 (an average of 14.3 million).

"I want to highlight that the user numbers we saw in January of this year indicate that our MAU trend has already turned around and our Q1 trend is likely to be back in the range of absolute net adds that we saw during the first three quarters of 2014,” he told analysts.

Costolo also confirmed reports from earlier in the day that Twitter had struck a new deal with Google (GOOGL) to include real-time tweets in the top-ranked search engine again. Twitter ended a similar deal in 2011, but Costolo said the new deal would help enlarge the audience for some new initiatives, including pre-selected “instant timelines" that are aimed at new users.

“We’ve got the opportunity now to drive a lot of attention, to aggregate eyeballs, if you will, to these logged out experiences, topics and events that we plan on delivering on the front page of Twitter,” the CEO told analysts. "And that's one of the reasons this makes a lot more sense for us now."

Instant timelines, which will include a variety of tweets on a particular topic selected both by computer algorithms and human curators, could dramatically improve the Twitter experience for new users, as well as for the millions of people who simply arrive at the company’s Web home page without signing in. And such timelines, of course, will be able to incorporate promoted tweets and advertising.