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Twitter's slipping user growth spooks investors

Sharon Gaudin | Feb. 10, 2014
Despite strong Q4 sales increase, stock plunges after Twitter acknowledges sliding user growth and engagement numbers

Scott Strawn, an analyst at IDC, said too early to get a handle on social media business cycles.

"A lot of these companies are dependent on rapid user growth," he said. "We're really still trying to understand what those cycles look like. The first example was MySpace. We saw a lot of rapid adoption and then very rapid collapse. If you're not deeply engaged, there is that potential for rapid collapse. But we haven't seen enough of these cycles to get a handle on these trajectories."

The social networking world is, after all, still relatively young. Facebook, the world's largest social network, just marked its tenth anniversary as a company this week.

Thus, social media players are still trying to figure out how to keep growing while continuing to innovate.

Olds suggests that Twitter needs to do something to expand its offerings.

"Twitter is still a one-trick pony," he said. "With Twitter, users get a long list of pithy quotes that are often commenting on a momentary event. I haven't seen any research, but I suspect Tweets don't have a long shelf life. It might be time to reveal a second act, extending the platform in a way that gives users more to do and engages them for longer periods of time."

Twitter does offer its users a sense of immediacy.

For instance, 24.9 million tweets were posted during Sunday's Superbowl featuring comments on the game and halftime show. The total set a single event record for Twitter.

Twitter was also a major part of last month's presidential State of the Union address, logging with 1.7 million related tweets. It's regularly a part of big happenings, whether a major storm, political upheaval or a sporting event.

Facebook may have a lot more users than Twitter, but is looking to match the latter's sense of urgency. For instance, Facebook has gone so far as to mimic Twitter's Trending feature and hashtags.

Now maybe it' time for Twitter to take a page from Facebook.

Twitter should be looking around to see what company, and what fresh ideas, they can add to their own site, as well as innovating internally.

Twitter isn't in trouble — yet, noted Brian Blau, an analyst with Gartner, Inc.

"If Twitter is still struggling with user growth in three to four quarters, then there may be a more fundamental issue with the core product proposition and value," Blau said. "I don't think that Twitter is there yet so we will need to watch what happens and monitor if their efforts in 2014 are successful."

 

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