Twitter’s shares have hit their lowest point since the company’s IPO last year, and critics predict impending doom for the social media site. Is Twitter in danger of being crushed by its rivals?
Twitter’s stock opened at $37.65 on Wednesday following its quarterly earnings report, and it has only recovered to $39.65 at 3:30 p.m in New York today. Although the social media company more than doubled its quarterly revenues to $250 million, it also reported slowing growth in new users and a quarterly loss of $132 million.
Dick Costolo, CEO of Twitter, was happy with the financial results. “We had a great first quarter,” he said during the earnings conference call. “Revenue growth was up 119 percent fueled by two things: increased engagement and user growth. Last quarter I spoke about a number of initiatives to drive user growth, and I like the progress we’ve made there.”
But investors didn’t share his optimism over user gains. Over the last year Twitter’s monthly active user base expanded by 25 percent to 255 million. Although that growth rate sounds healthy, it is down from 30 percent for the year prior. Investors feel that Twitter is not picking up new users fast enough, and are also worried about user engagement.
Growth in timeline views, which serve as a bell weather for engagement, has also slowed. The first quarter of 2014 saw 157 billion timeline views, an increase of 15 percent over last quarter; but that jump was smaller than the 26 percent surge reported in Q4. Twitter has attempted to address this slowdown with new profile page designs and features which bare a resemblance to that of competitor Facebook.
Twitter is in direct competition with Facebook for advertising revenue, but Mark Zuckerberg’s social media titan is currently thrashing Twitter’s user numbers. Facebook boasts 1.28 billion monthly active users, more than a billion more than Twitter.
Twitter’s revenue increase may provide the company with some comfort, particularly as 80 percent of sales came through mobile advertising. But those figures will soon drop if the company cannot significantly boost its user numbers and engagement within a reasonable timeframe. Twitter’s strategy to rectify the problem so far seems to have been to emulate Facebook’s layout. But the company will need more than that. Unless it can effectively allow its users to sort between information they are not interested in and what they are not, the social media site will continue to struggle in keeping users hooked, and attracting new users to the platform. The next year will be crucial for Costolo.