Fans of Twitter (NYSE:TWTR) were waiting with bated breath leading up to its highly anticipated Q2 earnings report in late July. Surely, Twitter would report solid revenue numbers compared to last year since its comparables were so meager. But how would it answer the primary question on most people's minds: could Twitter finally reverse its trend of slowing user growth?
One look at Twitter's stock price jump this past month -- it's up over 25% -- would seem to indicate growing its user base is no longer a primary concern. But after further review, Twitter fans have little to get excited about, comparatively speaking, when similar services such as Facebook's (NASDAQ:FB) mobile messaging service WhatsApp are growing by leaps and bounds. A closer look at Twitter's Q2, and the phenomenal growth of WhatsApp, paint a picture Twitter fans aren't likely to enjoy.
Just the facts
Much has been made of the impact the recently concluded World Cup had on Twitter and Facebook. A huge number of tweets and posts were credited to soccer fans during the world's biggest sporting competition. Facebook notched an impressive 3 billion interactions during the World Cup, while Twitter enjoyed 672 million soccer-related tweets. The hope was all that tweeting would carry over, boosting Twitter's much-maligned active monthly user count. And it sort of did.
When Twitter reported its user numbers last month, it was quick to point out its 271 million active users was a 24% increase from the same period a year ago. Twitter's active mobile users showed even better improvement, jumping 29% compared to 2013. That certainly sounds good, and it seemed to placate investors and Twitter aficionados, as the aforementioned stock price jump demonstrates.
But all the positive hype surrounding Twitter may prove to be just that; hype. Yes, Twitter now has 271 million active users, thanks to the World Cup, but how many new tweeters joined the ranks in the past three months? That number isn't quite as impressive, to say the least.
Heading into 2014's second quarter, Twitter boasted 255 million monthly active users; a 25% improvement from the year prior. But that means sequentially, even with the World Cup driving unprecedented social media usage, Twitter only gained 16 million new users, an improvement of 6% over Q1 of this year.
Now for the even worse news
Much was made of Facebook acquiring mobile messenger WhatsApp for $19 billion a few months ago. But based on its incredible user growth, not to mention Twitter's valuation of nearly $30 billion, WhatsApp may turn out to be a $19 billion steal.
While Twitter was growing its second quarter user base by 16 million compared to Q1, Facebook's WhatsApp increased by 100 million in the past four months. WhatsApp now stands at over 600 million active users, more than twice Twitter's "paltry" 271 million. WhatsApp growth is impressive to be sure, but that's what should be expected of an early stage, growth business.
The problem for Twitter is that it is also considered to be in the early stages of its growth curve, yet it isn't even in the same ballpark as WhatsApp, and Facebook hasn't even taken its training wheels off yet. Whether or not Facebook is able to monetize WhatsApp as successfully as it has itself remains to be seen, but we know Facebook CEO Mark Zuckerberg loves his user data. WhatsApp, with its 600 million plus users, brings with it a plethora of information -- information Facebook can and will use to improve its advertising results, supporting its objective of increasing ad rates.
Final Foolish thoughts
Even as Twitter continues to bask in the afterglow of its second quarter, a closer examination reveals it's far from out of the woods. If WhatsApp is able to add 100 million new, active users in just four short months, does Twitter really warrant all the good tidings by adding 16 million in three months? And let's not forget Twitter's engagement concerns. A recent study of current and former Twitter users found the overwhelming majority of those who stopped using the service found it too difficult to find and filter the information of interest to them, and a shortage of followers.
Twitter's recent plan to force-feed tweets from non-followed folks may help address its engagement problems, assuming it doesn't alienate users first. But concerns about engagement, as legitimate as they are, pale in comparison to Twitter's user growth; or lack thereof, especially as it lags WhatsApp.
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Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Facebook and Twitter. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.