One of the biggest red flags going into Twitter’s IPO, and one that was reinforced by its first public earnings statement last February, was the fact that Twitter’s rate of user growth had been steadily decelerating for over a year. Last quarter was its worst yet in this respect, with the company adding only 9 million monthly active users. That’s only a 3.8 percent increase over the previous quarter.
Now Twitter has a new earnings statement out and, for the first time in six quarters, Twitter has finally reversed the decelerating growth trend, adding 14 million monthly active users, a 5.8 percent gain:
With the exception of last quarter, however, that’s still its smallest quarterly increase by percentage in years. That said, it at least shows Twitter reversing a troubling trend. To be sure, social networks generally level off when it comes to user growth. But Twitter’s usage, which is still far behind Facebook, not to mention a host of messaging apps including Facebook’s own Whatsapp, could hardly be called “mainstream.”
If you’re looking for evidence that Twitter’s user growth is still troubling to investors, know that this afternoon Twitter’s share price hit an all-time low at $38.50, despite the fact that it beat expectations on earnings and revenue expectations. User growth is the missing piece of that puzzle.
Because it focused on growing its user base before finding ways to monetize it, Twitter’s revenue will likely continue to grow for quarters to come — this quarter saw revenue double to $250.5 million. But if Twitter wants to be anything more than a niche service, then this can’t be the “leveling off” of users experienced by so many social networks. Twitter needs a shot in the arm.