Twitter Inc. recently released its first earnings report as a public company. While some of the data was encouraging to Twitter’s revenue generating performance, the data that sits at the core of their business model was disappointing. Two major takeaways from the earnings report were that Twitter’s revenue is increasing, but user growth is slowing down.
Twitter is still doubling its revenue each quarter, and has found ways to make more money per user, according to a recent article in The Wall Street Journal regarding Twitter’s earnings release. Twitter has become a nearly required part of advertising campaigns, blanketing the Internet, television and billboards with hashtags for advertisers, according to the WSJ. While Twitter is also laying plans to generate revenue by selling ads on other websites, its core business depends on the scale of its mainstream users.
The more active users Twitter has, the bigger its audience will be for advertisers to target. With this in mind, continuous slow user growth may have negative effects on Twitter’s already lofty market value that decreased by nearly a quarter following its recent earnings release. That market value is currently at about $30 billion.
Early in 2013, Twitter projected 400 million monthly active users by year-end. Twitter’s recent earnings release stated that its monthly active users at year-end were 241 million. This was an increase of 30 percent year-over-year, but an increase of just nine million since the last quarter. Seventy-six percent of Twitter’s active users, or 184 million, are using the service from their mobile devices.
Twitter’s social media counterpart, Facebook, has more than half of the U.S. online population as active users, representing five times the worldwide users of Twitter, according to the WSJ. With Twitter lagging behind Facebook in number of users, Twitter must determine how to increase its account holders to appease investors and advertisers that use their advertising services.
Twitter CEO Dick Costolo responded to analysts last week by stating that Twitter’s plans for improved functionality can speed up user growth, stressing the need to ease the sign-up process and get new users “up to speed very quickly.” He also said several initiatives planned over the next year will change “the slope of the growth curve.”
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Information from The Wall Street Journal was used in this article.