SAN FRANCISCO — As Twitter has struggled to attract new users, the one bright spot has been its ability to wring more and more advertising dollars from marketing messages shown to the people on its service.
Now, under intensifying competition from companies like Facebook, its once-blistering ad growth is faltering — and so is Twitter’s stock.
Twitter posted weaker-than-expected financial results for the first quarter on Tuesday and told investors to reduce their expectations for the rest of the year.
The quarterly report, which was supposed to be published after the stock market closed, was obtained early and posted on Twitter by the financial analytics firm Selerity. The release sent Twitter shares plunging. Trading was briefly halted so the company could disseminate its results. That steepened the drop, and the stock ended the day down about 18 percent.
Twitter’s revenue grew 74 percent in the quarter, but that was less than the 97 percent growth seen in the fourth quarter and below the company’s own forecasts. Executives attributed the slowdown to a transition to a new advertising model that priced certain ads based on the result, such as whether the viewer downloaded an app, instead of whether the person simply clicked on it.
Analysts said, however, that the shortfall suggested that the real-time network might be less useful than competitors for what are called direct-response ads.
“Do people want to leave what they are doing on Twitter and do something else like buy something?” said Debra Aho Williamson, an analyst at the research firm eMarketer. “Direct-response advertisers haven’t figured out the best way to use Twitter, and Twitter hasn’t figured out the best way to market to them.”
The quarterly results may renew calls for the resignation of Twitter’s chief executive, Dick Costolo, who has been under fire from some investors ever since the company’s initial public offering in the fall of 2013.
“Management will again have to address credibility concerns,” Mark Mahaney, an analyst with RBC Capital Markets, wrote in a note to investors shortly after the results came out.
Investors had counted on Twitter’s strong advertising performance to offset the trouble that the service has had in attracting new users.
“User growth doesn’t appear to be notably improving, and now monetization is failing to live up to expectations,” said Richard Greenfield, an analyst with BTIG Research. “That’s why the stock is selling off so hard. The question is, How much of this is Twitter’s own missteps versus how much of this is peers such as Facebook, Instagram and Snapchat eating into their advertising?”
Twitter said that 302 million people used its service at least once a month during the first quarter. That is up from 288 million in December and in line with recent trends. But the figure failed to impress investors, who have been eager to see results from recent changes Twitter has made to help newcomers better understand how to use its service.
Anthony Noto, Twitter’s chief financial officer, said that user growth in April was “off to a slow start.” But the company plans to start adding to its count people who access the service only via text message, which would have added six million users to the first-quarter total.
Twitter’s revenue, most of which derives from advertising, came in at $436 million in the first quarter, up from $250 million in the same quarter a year ago. That was well below the $457 million that Wall Street analysts had expected, according to estimates collected by S&P Capital IQ.
“We are increasingly concerned that Twitter’s lack of real-time commercial intent (à la Google) or detailed, authenticated profiles (à la Facebook) will at some point materially limit TWTR’s ad growth potential,” Mr. Mahaney wrote. TWTR is the company’s stock symbol.
The company also continued to lose money in the first quarter: $162 million, or 25 cents a share. Excluding stock-based compensation and certain other expenses, however, the company reported a profit of $46.5 million, or 7 cents a share. On that basis, Wall Street had expected Twitter to earn 4 cents a share.
In a conference call with analysts, Mr. Costolo said that it was too early for the new product initiatives to generate meaningful results. “These are Version 1 products,” he said. “We’re going to iterate on them frequently.”
Mr. Costolo said that since the company began allowing users to shoot and post video directly from the Twitter app in January, “we’ve seen orders-of-magnitude increases in the volume of native mobile video shared.”
For the year, Twitter told investors to expect revenue of $2.17 billion to $2.27 billion. That is significantly lower than the $2.38 billion that Wall Street has been projecting.
Twitter has built itself into a global platform for public conversation conducted in 140-character snippets known as tweets. The company has traditionally been strong in mobile advertising, since its ads look almost exactly like other text, photo and video posts in its feed and they easily adapt to fit the smaller displays of cellphones.
Such ads are growing in popularity with marketers, but Facebook, Yahoo and many media sites also offer them.
To make its ads easier to buy, Twitter announced a new advertising partnership with Google on Tuesday. Later this year, brands and ad agencies using Google’s popular DoubleClick advertising platform will be able to buy ads on Twitter just as they do on other sites. Marketers will also be able to use Google’s analytics to measure the performance of Twitter ads.
The deal builds on an earlier deal in which Twitter agreed to give Google real-time access to the half-billion tweets posted every day. Beginning in May, Google intends to display those tweets as part of its search results, giving Google searches an up-to-the-moment freshness they now lack.
Both deals reflect the determination of Mr. Costolo and Mr. Noto, his financial chief, to extend the reach of Twitter beyond its core platform.
Twitter also announced that it had acquired TellApart, an advertising technology company that specializes in direct-response marketing, which could help its performance with those ads.
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