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Twitter seeks to soar despite slowing adoption

Twitter seeks to soar despite slowing adoption
Nicole Lee
Nicole Lee|@nicole|April 29, 2014 10:43 PM

When Twitter released its first earnings report earlier this year, one of the more distressing trends was that the company's user growth is slowing, and has been for the better part of a year. That's certainly not the kind of results you'd want from a firm that just filed its IPO a couple of months prior.

Fast forward a few months however, and it seems Twitter has recovered. In its first quarter earnings report for 2014, the social media firm says it's grown its monthly active user count to 255 million, which is a 5.8% growth from last quarter. Revenue is also up -- it made $250 million in Q1 this year, which is a whopping 119% growth from this time in 2013. Twitter is leveraging its TV partnerships as well, stating that 92 percent of users have taken action like tuning into a TV show after seeing a related tweet, and even Nielsen has found a causal relationship between TV watching and Twitter activity. So everything seems pretty rosy, right?

Well, not quite. The company is still operating at a loss (around $132 million) and that 5.8% user growth number is still really low -- far lower than expected, and not as high as the 10% growth Twitter enjoyed just a year ago (Contrast that to Facebook, which just surpassed over a billion monthly users recently). To investors, that's a worrying number, which explains why Twitter's shares dropped by as much as 10% in after hours trading.

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But it's not as if the website isn't popular. CEO Dick Costolo made a case in its earnings call earlier today that Twitter is actually incredibly mainstream. "We had 3.3 billion views of tweets just about the Oscars in the 48 hours after the show," he said. He continued that if you put that number in the context of a popular YouTube network which gets about 3 billion views in a month, it's a huge success. Twitter also saw a 26% increase of retweets and faves this last quarter, which Costolo said is a sign that new users are just as engaged as existing ones. There was also strong advertiser demand during live events like the Winter Olympics and the Super Bowl, which indicate that users flock to the social media site in those momentous occasions.

Therein, however, lies the rub. The company needs more than just the occasional event or television show to attract users to its flock. The Oscars don't happen every day, and the Olympics and World Cup only come every four years. Twitter needs to be a place where folks can just, well, chat about everyday things, much like how Facebook is for a lot of people. Or just to get news alerts and learn about what's going on in the neighborhood. For that to happen, Twitter needs to be friendlier and more accessible. The company is already taking steps towards this with redesigned user profiles, reducing steps in sign-up and enhancing push notifications to encourage discussion and conversations. In the earnings call, CFO Mike Gupta said that user experience is still the guiding factor for the company, which we applaud, if only because that's one of the key ways to get more users.

"We think of Twitter as this companion experience as to what's happening in the world," said Costolo. Now it's time to encourage everyone else in the world to think the same.

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Twitter seeks to soar despite slowing adoption