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Twitter shares nosedive as growth of new users slows

February 5, 2014

Twitter shares plummeted in after-market trading after data revealed the social media website is attracting fewer new users than investors had hoped.

The company beat analyst estimates in its fourth quarter earnings report on both revenue and earnings per share, but this was overshadowed by the slowing number of new monthly active users. Shares fell by as much as 13 percent after the market closed on Wednesday.

Twitter attracted 9 million new active users during the fourth quarter of 2013, an increase of 3.8 percent from the previous quarter but fewer than expected. In the U.S., Twitter only added 1 million new users over the three month period. Timeline views also dropped to 148 billion in the final quarter of last year, from 159 billion in the third quarter. A timeline view occurs every time a user refreshes a page on desktop or mobile and is the equivalent to a page view on other websites.

The social media company’s financials were more encouraging. For the three months ending 31 December, Twitter reported revenues of $242.7 million, a 116 percent increase from the same period last year. Advertising revenue also increased, reaching $220 million in the fourth quarter, up 121 percent from a year ago. Twitter’s fourth quarter adjusted earnings per share of $0.02 beat the estimates of Wall Street, which predicted a loss of $0.02

Twitter is directly battling Facebook for mobile advertising revenue, and in this respect a slowing growth of new users is worrying. Although Facebook’s sequential growth over the same time period was 0.2 percent lower than its rival, it boasts 1.23 billion monthly active users compared to Twitter’s 241 million. Twitter is already losing the numbers battle heavily, and needs to continue to grow to have any chance of catching up.

“Up until last year growth has been viral and organic,” said Twitter CEO Dick Costolo on an earnings conference call. He went on to explain the company launched features in the fourth quarter that will enhance user interaction in the future. Costolo also hinted at an increased focus on private messages, and said the company needs to “make Twitter a better Twitter.”

Costolo admitted that Twitter aims to bridge the gap between the global awareness of Twitter and deeper engagement on the platform. He acknowledged keeping new users active is a problem area for the company, and helping them to understand and enjoy the concept of Twitter in the first moments of joining is a priority. Costolo said the company has a “very, very clear roadmap” to help users understand Twitter quicker.

Although the company is performing better than expected financially, the advertisers spending the money on the platform will quickly disappear if Twitter cannot attract active users in the same numbers as it has done. But the company has plans in place to revamp the experience for new users, and a great deal will now hinge on the success of those strategies.

 

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Filed Under: Global, Internet, Mobile, Social, Top Stories

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