Twitter Inc.’s (NYSE: TWTR) highlight for the March quarter was its 255 million monthly active users, a 25 percent increase year-over-year. Sounds good -- but the real story is that Twitter is having an increasingly difficult time getting people to start tweeting.
Twitter added 19 million users in the first quarter of 2013, but just 14 million in Q1 2014, despite a major redesign to make Twitter profiles more attractive.
With a constant stream of short messages filled with “#” and “@,"Twitter can be a daunting place for beginners. That’s kept Twitter from achieving the same mainstream adoption as something like Facebook, which is a major problem when the company’s primary revenue stream is advertising.
The San Francisco company made a huge push in the first quarter of 2014 to make its platform more accessible for new users, but the figures in Twitter’s first-quarter earnings report show that things aren’t going so well.
What’s worse is that the people already on Twitter are using it less. Twitter CEO Dick Costolo said the company saw “increased engagement” in the first quarter, but Twitter’s own metric (timeline views per monthly active users) shows that engagement decreased 8 percent worldwide. Twitter’s total timeline views remained below the 2013 peak.
It’s not all bad for Twitter. Revenue surged 119 percent to $250 million in the quarter, beating Wall Street expectations of $242 million. Excluding one-time events, Twitter’s earnings per share broke even while Wall Street expected the company to lose 3 cents EPS. Costolo also said that the decreased Timeline views is a result of design tweaks that don't require users to click around to timelines as much.
The problem is that it may not make a difference to Twitter investors, who seem to care primarily about user growth. After Twitter announced that user growth slowed to 30 percent in its previous earnings report, its stock took a major hit. This time, shares of Twitter are already down 10 percent in after-hours trading, hitting an all-time low.
Twitter did purchase itself a safety net. MoPub, a mobile ad network that allows Twitter to sell ads to non-Twitter apps, helps Twitter guard against slowing user growth.
“With the integration of MoPub, we now reach more than 1 billion iOS and Android users each month, making us one of the largest in-app mobile ad exchanges in the world and the only one at scale to offer native in-app advertising,” Costolo said.
Costolo also said that events like the Oscars, Olympics and the Super Bowl make Twitter an increasingly important medium for mainstream users, but investors might just think it’s too little, too late.