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Twitter finds profit but needs more tweeters

CEO Dick Costolo, facing pressure to rapidly grow the social network, reports Twitter's third straight quarter of profit. Even though growth of monthly active users failed to impress, the stock soars.

James Martin/CNET

Can Twitter turn your tweets into a money-making business?

Chief Executive Officer Dick Costolo told investors the social-media giant did just that, despite reporting growth in monthly active users for the fourth quarter that fell short of Wall Street expectations.

Twitter said it notched a profit of $79.32 million, or 12 cents a share, after adjusting for items such as stock-based compensation, up from $9.77 million a year ago. Revenue almost doubled to $479 million. Analysts on average had expected 6 cents per share on $453.14 million in revenue.

Twitter said 288 million people now actively use the service every month, up from the 284 million it reported in the third quarter. Wall Street had looked for 295 monthly active users. Shares surged more than 10 percent in after-hours trading as investors bought into Costolo's message that he's finding new ways to make money.

Twitter's fourth-quarter results suggest Costolo gets to keep his job -- at least for now. Investors had been calling for him to step down as the company struggled to deliver meaningful growth in sales and profit.

The company says it's finding new ways to get users to interact with it more often and is working to reach people who don't yet use its service. Twitter is also seeking innovative ways for advertisers to reach customers and, they hope, convince you to buy their products.

Earlier this week, Twitter and Google reportedly reached an agreement to display tweets in Google's search results, according to Bloomberg. During Thursday's earnings call, Costolo confirmed that Twitter and Google have joined in a deal to drive users to the social network, without giving details.

The company already has deals to deliver data to Microsoft's Bing search engine and to Yahoo, and this week said it will show ads in Flipboard's app for smartphones and tablets. Those efforts could help the company reach more people outside of the social network and, as a result, generate more ad sales.

Twitter additionally has released new features designed to increase usage of its service on mobile devices, including new video features in January. The company has also begun using an algorithm to display important tweets from users' streams when they log onto the service.

Delivering a compelling mobile experience has become vital to Twitter and its rivals as people increasingly prefer smartphones over other computing devices. More than 2 billion people -- or over a quarter of the world's population -- will have a smartphone next year, according to eMarketer.

Costolo said Twitter lost roughly 4 million users during Apple's iOS 8 rollout, due to a software glitch. Apple didn't immediately respond to a request for comment. He also discussed at length how Twitter is trying to grab -- and keep -- new users. He pointed specifically to several new features, including the ones for viewers who aren't logged in.

"We've got this really great opportunity of people that hear about Twitter or read about Twitter, or see it in the news and we throw up this wall in front of them and make them go through the hoops of signing up," Costolo said, adding that the new features are meant to knock down that wall.

To stand out, Twitter sells itself as a central hub of real-time communication. News organizations send urgent headlines out using Twitter, sports stars post photos during games, and politicians use it to spread their message.

The company has also been able to turn that usage into a prime advertising spot. Through a technology it calls "promoted Tweets," Twitter inserts marketing messages into users' streams. By comparison, Facebook relies more on inserting images and videos into a user's stream, based on information about who a user is, what they like and other details.

One metric investors and advertisers use to gauge how active Twitter's users are, and how often they view pages on the site, is called timeline views. During the fourth quarter, Twitter said timeline views were 182 billion, up from the 181 billion it counted in the September quarter, the 173 billion in June and 157 billion in March.

The company said it expects revenue of $440 million to $450 million for the current quarter.

Updated, 3:38 pm PT: Added more details from the earnings call.