Has Twitter’s Growth Sputtered to a Halt?

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

While Twitter (NYSE: TWTR  ) has been on a steady growth path worldwide, the social media site's gains in the United States stalled at the end of 2013.

Globally Twitter, which reported 2013 results Feb. 6, had a good year as its average monthly active users grew from 232 million to 241 as 2013 closed, an increase of 30% year-over-year. And while that number looks good on the surface, it's actually a little misleading since only 3.9% of those gains occurred in the fourth quarter.

In the United States, the numbers were far more troubling as user growth was essentially flat as well. Overall usage of the site actually fell in the fourth quarter, as reported by Bloomberg, with Twitter timelines receiving 148 billion views, down from 159 billion in the third quarter.

Reversing the trend

In an earnings call to discuss the first-ever earnings report from the company, which went public in November, CEO Dick Costolo said he is focused on reversing the trend.

"Up until last year, our growth has been viral and organic," he said. "Growth was something that happened to us." Now "it will be a combination of changes introduced over the course of the year that will start to change the slope of the growth curve."

That may not be so easy. While Twitter is popular, it may be more of a niche product than Facebook  (NASDAQ: FB  ) -- useful in some areas, but not as integrated into people's daily lives.

"Twitter needs to answer the question about whether it can ever become a mass-market product, or whether it's more destined to be a niche for news junkies," Robert Peck, an analyst at SunTrust Robinson Humphrey in New York, told Bloomberg.

This has happened before

In November 2009, Venturebeat reported that a number of tracking groups including Comscore, Compete, Google, and Quantcast agreed that Twitter's U.S. traffic had "reached a peak in July or August and has begun to decline slowly." According to Comscore, October 2009 traffic was down 8% from from September 2009, while Compete shows a more modest decline of 2.1%.

Those numbers, as you can see from the chart above, rebounded and the company began growing again in the U.S., but not nearly as much as it has globally where the company had 30 million active monthly users when it began 2010 and 241 million at the end of 2013.

Untapped markets

While Twitter may have plateaued in the U.S., it did reveal even more international expansion in its earnings report. The company said it "made its platform more accessible to a broader range of advertisers by launching its self-serve advertising platform to small and medium-sized businesses in the UK, Ireland, and Canada." That's somewhat positive, but even if the company stays on an upswing globally, that may not be as valuable as U.S. growth.

In its earnings release, Twitter showed a rise in ad revenue per timeline (what Twitter calls its feed) from $0.36 per thousand views to $0.60. That's good, but it's much lower than the comparable number in the United States where revenues per thousand views increased from $2.10 to $2.89 in the fourth quarter.

A blip or a stumble

While Twitter's 241 million active monthly users is an impressive audience, it's less than a quarter of the 1.228 billion monthly active users Facebook ended 2013 with. One one hand, that shows huge room for growth for Twitter, but Facebook may be a broader product than Twitter with a much higher ceiling for total users. 

Twitter may not be a stagnant product at the end of its growth cycle, but it may be at the end of its organic growth cycle in the U.S. unless it comes up with something new.

Brian Blau, an analyst at Gartner, told Bloomberg Businessweek that he was troubled by the slowing user growth.

"They've got some user engagement issues," said Blau. "What I don't see here is any kind of formula that says they've got the killer gigantic big kinds of products and revenues that you see from companies like Facebook and Google. They're trying to fix it, but they're not there yet."

The next step for you

Want to figure out how to profit on business analysis like this? The key is to learn how to turn business insights into portfolio gold by taking your first steps as an investor. Those who wait on the sidelines are missing out on huge gains and putting their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal finance experts show you what you need to get started, and even give you access to some stocks to buy first. Click here to get your copy today -- it's absolutely free.

Read/Post Comments (3) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 10, 2014, at 12:12 PM, wesam wrote:

    It is all good and nice article. But a simple person like me would be thinking that TWTR share price is over valued ( even though the growth prospects are not bad and the company is good. I like it bit this this expensive ! ).

    I'm not that sophisticated so as a result I would think that there is no value in this share when it comes to a simple comparison between its " Market Value" and intrinsic value ( something no one has been willing to talk about for sometime and they continue hoping they don't have to).

    Please make no mistake, I'm not an 'expert' like those so called "Equity Analyst" but I wont by this share before it is traded @ 30- 35

  • Report this Comment On April 01, 2014, at 8:33 PM, hennrymark70 wrote:

    Twitter may still be growing, but its efforts to add users in the United States have stalled.

  • Report this Comment On April 01, 2014, at 9:50 PM, annaarron wrote:

    Analysts at Goldman Sachs have rated the stock of Twitter a buy, targeting a price of $46. They say that Twitter has tremendous potential to grow, and

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2832264, ~/Articles/ArticleHandler.aspx, 8/29/2015 5:46:25 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Daniel B. Kline

Daniel B. Kline is an accomplished writer and editor who has worked for the Microsoft's Finance app and The Boston Globe, where he wrote for the paper and ran the business desk. His latest book "Worst Ideas Ever" (Skyhorse) can be purchased at bookstores everywhere.

Today's Market

updated 8 hours ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:01 PM
TWTR $26.83 Up +0.37 +1.40%
Twitter CAPS Rating: ***
FB $91.01 Up +1.28 +1.43%
Facebook CAPS Rating: ***